2. PGM market outlook: our perspective

Transcription

1 2. PGM market outlook: our perspective Richard Stewart EVP Business Development SA PGM Investor Day 7 June 218 1

2 Disclaimer NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. This presentation is for informational purposes only and does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or any other jurisdiction nor a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The shares to be issued in connection with the offer for Lonmin plc ( Lonmin and the New Sibanye Shares, respectively) have not been and will not be registered under the US Securities Act of 1933 (the Securities Act ) and, accordingly, may not be offered or sold or otherwise transferred in or into the United States except pursuant to an exemption from the registration requirements of the Securities Act. The New Sibanye Shares are expected to be issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(1) thereof. This presentation is not a prospectus for purposes of Directive 23/71/EC (and amendments thereto, including Directive 21/73/EU, to the extent implemented in any relevant Member State) (the Prospectus Directive ). 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Forward looking statements This presentation contains forward-looking statements within the meaning of the safe harbour provisions of the United States Private Securities Litigation Reform Act of These forward-looking statements, including, among others, those relating to Sibanye Gold Limited s trading as Sibanye-Stillwater s ( Sibanye-Stillwater ) financial positions, business strategies, plans and objectives of management for future operations, are necessarily estimates reflecting the best judgment of the senior management and directors of Sibanye-Stillwater and Lonmin. All statements other than statements of historical facts included in this presentation may be forward-looking statements. Forward-looking statements also often use words such as will, forecast, potential, estimate, expect and words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and should be considered in light of various important factors, including those set forth in this disclaimer. Readers are cautioned not to place undue reliance on such statements. The important factors that could cause Sibanye-Stillwater s and Lonmin s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, our future business prospects; financial positions; debt position and our ability to reduce debt leverage; business, political and social conditions in the United Kingdom, South Africa, Zimbabwe and elsewhere; plans and objectives of management for future operations; our ability to service our bond Instruments (High Yield Bonds and Convertible Bonds); changes in assumptions underlying Sibanye-Stillwater s and Lonmin s estimation of their current mineral reserves and resources; the ability to achieve anticipated efficiencies and other cost savings in connection with past, ongoing and future acquisitions, as well as at existing operations; our ability to achieve steady state production at the Blitz project; the success of Sibanye-Stillwater s and Lonmin s business strategy; exploration and development activities; the ability of Sibanye-Stillwater and Lonmin to comply with requirements that they operate in a sustainable manner; changes in the market price of gold, PGMs and/or uranium; the occurrence of hazards associated with underground and surface gold, PGMs and uranium mining; the occurrence of labour disruptions and industrial action; the availability, terms and deployment of capital or credit; changes in relevant government regulations, particularly environmental, tax, health and safety regulations and new legislation affecting water, mining, mineral rights and business ownership, including any interpretations thereof which may be subject to dispute; the outcome and consequence of any potential or pending litigation or regulatory proceedings or other environmental, health and safety issues; power disruptions, constraints and cost increases; supply chain shortages and increases in the price of production inputs; fluctuations in exchange rates, currency devaluations, inflation and other macro-economic monetary policies; the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance; the ability to hire and retain senior management or sufficient technically skilled employees, as well as their ability to achieve sufficient representation of historically disadvantaged South Africans in management positions; failure of information technology and communications systems; the adequacy of insurance coverage; any social unrest, sickness or natural or man-made disaster at informal settlements in the vicinity of some of Sibanye-Stillwater s operations; and the impact of HIV, tuberculosis and other contagious diseases. These forward-looking statements speak only as of the date of this presentation. Sibanye-Stillwater and Lonmin expressly disclaim any obligation or undertaking to update or revise any forward-looking statement (except to the extent legally required). Disclaimer 2

3 Sibanye-Stillwater PGM demand outlook 3

4 Platinum ounces () Platinum: the most functional precious metal Gross platinum demand remains industrial biased autocatalysts: 42% of platinum demand industrial applications: 29%, with demand largely driven by global growth platinum jewellery: 29% of total demand 217 platinum demand Gross platinum demand 4% 3% 3% 6% 9 8 2% 6% 5% 42% % Gross Autocatalyst Chemical Glass Petroleum Other Gross Jewellery Electrical (Net) Investment Medical and Biomedical 1 27A 29A 211A 213A 215A 217A Gross Autocatalyst Jewellery Chemical Electrical Fuel Cells Glass Investments Petroleum Medical and Biomedical Sources include: Johnson Matthey, SFA Oxford, WPIC, company information *PGMs: platinum group metals Other There is more to PGMs* than autocatalysts 4

5 Palladium ounces () Palladium is largely an auto story Palladium continues to have a much higher exposure to auto demand growth, given its primary use in gasoline autocatalysts gross autocatalyst demand accounted for 84% of total palladium demand in 217 other industrial demand components accounted for c.13% of total demand 217 palladium demand Gross palladium demand 5% 4% 4% 2%1% % 27A 28A 29A 21A 211A 212A 213A 214A 215A 216A 217A Gross Autocatalyst Chemical Dental Electronics (net) Jewellery (net) Other Autocatalyst Gross Chemical Dental Electronics (net) Jewellery (net) Investment (net) Other Sources include: Johnson Matthey, SFA Oxford, WPIC, company information Sustained growth in demand over the last decade 5

6 PGMs are a basket Irdium Breakdown of demand by metal use (217) 1 Demand (Moz) 1% Global prill split 19.7 Ruthenium 1 8% 7.2 Rhodium % Palladium % Platinum % Overall PGMs % % 2% 4% 6% 8% 1% Investment Autocatalysts Jewellery Industrial % South Africa Russia North America Zimbabwe Other Global Platinum Pt Pd Palladium Rh Rhodium Sources include: Johnson Matthey, SFA Oxford, WPIC, company information PGMs should not be looked at in isolation 6

7 Automobiles and PGMs Vehicle growth is expected to increase at a global CAGR of 2.1% over the next 1 years By 224, the light duty vehicle car park is expected to grow to 16 million vehicles from 92 million vehicles in 217 By 224, the heavy duty vehicle car park is expected to grow to 6 million vehicles from 5.4 million in 217 Total number of vehicles produced Passenger vehicles Heavy duty vehicles Diesel ICE Petrol ICE Battery electric Hybrid electric Fuel cells Diesel Electric Fuel cells ++Pt Pd ++Pd Pt No PGMs ++Pd /Pt Rh +++Pt Rh +++Pt Pd No PGMs +++Pt Rh Rh Rh Rh Legislation, technology, macro economics, public perceptions Sources include: Johnson Matthey, SFA Oxford, WPIC, company information Autos are about more than battery electric vehicles (BEV) and diesel vehicles 7

8 216A 217A 218E 219E 22E 221E 222E 223E 224E 216A 217A 218E 219E 22E 221E 222E 223E 224E Vehicles Vehicles The diesel debate Global warming versus human health Technology likely to close gap between diesel and gasoline CO 2 emissions and diesel and petrol NOx emissions Total cost of ownership of diesel still better fleet light duty diesel (LDD) accounts for 72% of total diesel LDD purchases in the EU Average.4g CO 2 /km increase of 217 new vehicle fleet in Europe compared to 216 (118.5 vs in 216) owes to reduced diesel share We forecast by 224 global ICE diesel market share decrease to 1% (from 18%), gasoline to 56% (from 78%) and the balance electric vehicles 12 Light duty vehicles 6 Heavy duty diesel vehicles (HDD), by engine type Gasoline Diesel Hybrid Electric Fuel Cell Gasoline Diesel Electric Hydrogen Other Sources include: Johnson Matthey, SFA, BASF, company forecasts A mix of vehicle types is required to meet global demands 8

9 Vehicles The outlook for BEVs is euphoric The outlook for battery electric vehicles (BEVs) is mixed and the spread of BEV penetration forecasts is extreme outlier BEV penetration estimates range from 2% to 11% by 225E Electric vehicle (EV) and BEV assumptions underpinning our PGM models are aggressive 33% EV penetration rate expected globally by 225E, with BEVs increasing global market share to 6% Tesla Model 3 U.S. Deposits and Refunds 14% 12% Outlier broker BEV penetration range (% of global car park) 4 Light vehicles, new technologies 1% 8% 6% 4% 2% outliers consensus 2 % 217A 218E 219E 22E 221E 222E 223E 224E 225E Sources include: Johnson Matthey, SFA, BASF, company forecasts 216A 217A 218E 219E 22E 221E 222E 223E 224E Gasoline - hybrid Diesel - hybrid Gasoline - electric Diesel - electric BEV Fuel Cell Our BEV forecasts are well within current market ranges 9

10 216A 217A 218E 219E 22E 221E 222E 223E 224E Vehicles Vehicles What does this actually mean Hybrid vehicles are at worst neutral, and possibly positive for PGMs Gasoline vehicles CAGR = 1.9% (+1.4m vehicles in 224 compared to 217) Diesel vehicles CAGR = -.8% (-.95m vehicles in 224 compared to 217) BEV CAGR = 33.9% (+4.3m vehicles in 224 compared to 217) Light duty vehicles Light duty vehicles A 217A 218E 219E 22E 221E 222E 223E 224E Gasoline Diesel Hybrid Electric Fuel Cell Gasoline Gasoline - hybrid Gasoline - electric Diesel Diesel - hybrid BEV Fuel Cell Sources include: Autofacts, Johnson Matthey, SFA, BASF, company forecasts Gasoline and Diesel vehicles remain dominant in the autos mix 1

11 Fuel cells Electrification of vehicle power train to include a range of hybrids, batteries and fuel cells Batteries are a good supplier of power but a weak store of energy while hydrogen tanks are a weak source of power but a good store of energy Nissan Leaf (BEV): 11kW and 151 miles* Toyota Mirai (FEC): 114kW and 312 miles* Tesla Model S (BEV): 311kW and 33 miles* Fuel cell vehicles to be included in electrification mix Initial penetration to come from depot-structured filling infrastructure Fuel cell technology is an integral part of our powertrain strategy. The advantages are very clear to us: zero emissions, long ranges and short tanking times... Christian Mohrdieck, Daimler's Fuel Cell Director We believe fuel-cell vehicles remain the ultimate type of zero-emission vehicle. Honda CEO Takahiro Hachigo (June 217) *Johnson Matthey Battery electric technology has paved the way for fuel cell development 11

12 Number of Vehicles Fuel cells: China road map Chinese government roadmap the deployment of fuel cell vehicles 5, units (4% passenger cars) by 22 and 1 hydrogen stations 5, units by 225 (8% passenger cars) and 3 hydrogen stations 1 million units by 23 and 1, hydrogen stations Japanese government s targets for fuel cell vehicles: 4, units by 22 2, units by 225 8, units by 23 At 1g/ton, 5 million fuel cell vehicles (<5% total market share) will consume the same amount of platinum as LDD vehicles in Europe in 217 Despite these plans, our modelled fuel cell penetration rates are conservative 4 2 Fuel cell light vehicles Fuel Cell Sources include: Autofacts, Johnson Matthey, SFA, BASF, company forecasts Fuel cell vehicles are the true disrupter of zero emission power trains 12

13 26A 27A 28A 29A 21A 211A 212A 213A 214A 215A 216A 217A 218E 219E 22E 221E 222E 223E 224E 225E 26A 27A 28A 29A 21A 211A 212A 213A 214A 215A 216A 217A 218E 219E 22E 221E 222E 223E 224E 225E Ounces() Ounces () Platinum jewellery demand forecast Historically, jewellery has been a shock absorber to platinum demand However, since 213 jewellery and investment buying have been more consistently cyclical Platinum jewellery price elasticity Platinum jewellery gross demand Platinum price () China Demand Global Jewelry Pt Price (US$ / oz) (rhs) - China - Europe - Japan - North America - Rest of World Source: Johnson Matthey, SFA Oxford, PGI, company estimates Demand likely to be driven by the platinum price 13

14 Ounces() Platinum demand forecast 9 Gross platinum demand A 29A 211A 213A 215A 217A 219E 221E 223E 225E Gross Autocatalyst Jewellery Chemical Electrical Fuel Cells Glass Investments Petroleum Medical and Biomedical Other Source: Johnson Matthey, SFA Oxford, WPIC, company estimates Platinum demand to remain steady over the forecast period 14

15 Ounces(') Palladium demand forecast Gasoline expected to maintain majority share of global auto market to 225 Legislative and technological trends reinforcing outlook for steady, continued demand for palladium Industrial sector demand expected to remain flat at best on the back of anticipated palladium price resilience Jewellery demand expected to contract further due to increased price pressure and limited market development 14 Gross palladium demand A 28A 29A 21A 211A 212A 213A 214A 215A 216A 217A 218E 219E 22E 221E 222E 223E 224E 225E Autocatalyst Gross Chemical Dental Electronics (net) Jewellery (net) Investment (net) Other Source: Johnson Matthey, SFA Oxford, WPIC, company estimates Sustained palladium demand growth 15

16 Sibanye-Stillwater PGM supply outlook 16

17 Ounces () Platinum primary supply Capital underinvestment by South African PGM producers (c.7% of global primary platinum supply) since 28 global financial crisis insufficient to replace current production levels Without incentive-driven price growth, new supply coming on-stream seems unlikely or delayed South African primary production expected to decline by 13% by 225 (-1.5% CAGR) No new production expected from the western limb without a real basket price escalation exceeding 2-25%. western limb represents more than 7% of South African supply South African capital expenditure Primary platinum supply South Africa Russian Sales North America Zimbabwe Other Sources: SBG Securities and Johnson Matthey, SFA Oxford, company estimates Supply declines driven by low basket prices 17

18 Ounces () Palladium primary supply Supply expected to decline over forecast period on the back of a decline in South African production Russian and North American supply expected to remain stable Primary palladium supply South Africa Russian Sales North America Zimbabwe Other Source: Johnson Matthey, SFA Oxford, WPIC, company estimates Palladium supply constant, driven primarily by regions where basket prices are not platinum dependent 18

19 % % Ounces () Ounces () PGM recycling secondary supply 1 6 Platinum 2 4 Palladium A 212A 214A 216A 218E 22E 222E 224E A 212A 214A 216A 218E 22E 222E 224E 4 2 Europe Japan North America China Rest of World US$ / oz (rhs) Europe Japan North America China Rest of World (rhs) 6% 2 6% 1 2 5% % 1 4% 3% % 3% 8 6 2% 8 6 2% 4 1% % 21A 212A 214A 216A 218E 22E 222E 224E 4 2 1% % 21A 212A 214A 216A 218E 22E 222E 224E 2 Recovery rate (%) (rhs) Recovery rate (%) (rhs) A supply source driven by factors other than PGM prices 19

20 Ounces () Platinum supply deficit on the horizon Despite ongoing diesel and EV concerns, platinum s fundamentals remain robust limited primary and secondary supply growth anticipated globally significant producer capital underinvestment has resulted in long-term South Africa primary producer supply instability demand is well supported, even in weakening diesel markets Platinum likely to be marginally in surplus for the remainder of this decade, thereafter reverting to material deficit as primary production from South Africa contracts Platinum balance A 212A 217A 222E Surplus / (Deficit) Ex-ETF market balance Pt Price (US $ / oz) (rhs) Jewellery sensitivity Source: Internal demand and supply model based on WPIC information, broker consensus and other sources Despite declining diesel market share and EV concerns, we remain fundamentally bullish 2

21 Koz Days of excess inventory Palladium becoming the most precious PGM? Palladium set for sustained deficits excess inventories already closing in on normalised levels gasoline vehicles expected to maintain a majority market share to 225 and to increase in absolute numbers including gasoline hybrids primary supply to remain largely stable, to marginal decline excess palladium inventories forecast by Sibanye-Stillwater to reduce to nil by Palladium balance A 212A 217A 222E Excess inventory stocks A 1996A 2A 24A 28A 212A 216A 22E 224E Surplus / Deficit (koz) Pall Price (US $ / oz) (rhs) Ex-ETF market balance Platinum Palladium Rhodium Source: Internal demand and supply model based on WPIC information, broker consensus and other sources Palladium outperformance set to continue 21

22 grams per vehicle grams per vehicle Substitution from palladium to platinum We believe that it is inevitable that there will be substitution from palladium to platinum In our view, significant substitution unlikely in the short term (< two three years) Requires sustained (c.4 $/oz) price gap (OEM) several years to develop, implement and licence (OEM) Fabricators suggest technically feasible but timeous.. Recyclers claim to be seeing substitution already occurring in after market exhaust systems Our assumptions are modelled on substitution trends observed in 199s Substitution reduces platinum's sensitivity to diesel Average PGM loadings pre substitution Average PGM loadings post substitution A 213A 216A 219E 222E 225E Platinum Pt Palladium Rhodium. 21A 213A 216A 219E 222E 225E Pt Platinum Palladium Rhodium Source: Johnson Matthey, SFA Oxford, company estimates Supply pressures, technology and legislation will drive substitution rates 22

23 Koz Koz Koz Koz Substitution means better overall balance Platinum A 212A 217A 222E Surplus / (Deficit) Ex-ETF market balance Pt Price (US $ / oz) (rhs) A 212A 217A 222E Surplus / (Deficit) Ex-ETF market balance Pt Price (US $ / oz) (rhs) Palladium A 212A 217A 222E Surplus / Deficit (koz) Ex-ETF market balance Pall Price (US $ / oz) (rhs) A 212A 217A 222E Surplus / Deficit (koz) Ex-ETF market balance Pall Price (US $ / oz) (rhs) Source: Internal demand and supply model based on WPIC information, broker consensus and other sources Substitution provides more near-term certainty but is not a long-dated solution 23

24 Days Days Excess inventories A review of cumulative stocks since1974 confirms material palladium deficits Market is unsustainable as is and requires investment to drive supply Balancing the PGM basket is critical for a sustainable market Platinum A 1996A 2A 24A 28A 212A 216A 22E 224E Days excess inventory Palladium A 1996A 2A 24A 28A 212A 216A 22E 224E Source: Johnson Matthey, Sibanye-Stillwater (218) * Investment stock treated as a stock movement Days excess inventory Combined excess inventories are approaching the lowest levels in decades 24

25 Palladium Conclusion Platinum demand expected to be stable while primary supply is under threat Supply driven deficits are expected in the next three years Basket price increases of more than 25% required to incentivise South African supply growth Palladium demand will continue to increase underpinned by robust growth in gasoline market Sustained and material market deficits continue to be forecast Substitution across the PGM s appears inevitable, but unlikely to occur on a material scale in next three years Power trains will continue to evolve and comprise a mix of technologies over the long term, including fuel cells PGM markets need to be strategically managed as a basket and Sibanye-Stillwater is ideally positioned to deliver into changing demand cycles 9% 8% 7% 6% 5% 4% 3% 2% Global platinum:palladium prill split Russia North America Global net demand Zimbabwe Sibanye-Stillwater South Africa 1% % % 1% 2% 3% 4% 5% 6% 7% 8% Platinum Source: Johnson Matthey, SFA Oxford, WPIC, company estimates Strategic management of the PGM supply chain is required to meet forecast demand 25