Executive Summary / Key Takeaways

• Antifragile Diversification Creates Resilience: Sibanye Stillwater's transformation from a 2013 South African gold turnaround story into a multi-commodity, geographically diversified critical metals platform provides unique resilience against single-market disruptions, with US PGM operations, Australian zinc, and European lithium offering geographic offsets to South African operational risks.

• Operational Turnover Drives Margin Inflection: Proactive restructuring has delivered a 41% reduction in US PGM all-in sustaining costs to $1,207/oz, while South African PGM operations achieve guidance for the third consecutive year, demonstrating that management's cost discipline is working despite cyclical commodity headwinds.

• Balance Sheet Strength Enables Counter-Cyclical Positioning: Net debt to adjusted EBITDA of 0.89x and available liquidity approaching ZAR 47 billion provide firepower to complete the Keliber lithium refinery, expand the recycling footprint via Reldan and Metallix acquisitions, and weather commodity downturns while peers struggle with leverage.

• Green Metals Optionality at Minimal Cost: The Keliber lithium project—Europe's only integrated refinery—nears completion with strategic status under EU Critical Raw Materials Act, offering long-term exposure to battery metals at a time when one-third of global lithium supply operates unprofitably, while the recycling business generates steady margins from industrial waste streams.

• Critical Variables to Monitor: The investment thesis hinges on the Kloof gold operations review (expected to halve production to 2-3 tonnes), the timing of Keliber's responsible ramp-up in a depressed lithium market, and the sustainability of Section 45X credits which have contributed ZAR 5.2 billion to date.

Setting the Scene: From Distressed Assets to Critical Metals Infrastructure

Sibanye Stillwater Limited, founded in 2013 and headquartered in Weltevredenpark, South Africa, began life as a turnaround specialist, acquiring what were considered high-cost, end-of-life gold assets from Gold Fields (GFI). This origin story explains the company's DNA: operational discipline, cost focus, and the ability to extract value from assets others had written off. The early success in gold provided the credibility and cash flows to diversify into Platinum Group Metals (PGMs), first through South African acquisitions and then dramatically with the 2017 Stillwater purchase in Montana—marking the company's entry into geographic diversification and establishing the US as a strategic pillar.

Today, Sibanye Stillwater operates across eight distinct business segments that span three continents and multiple commodity cycles. The company makes money through conventional underground mining (SA PGM, US PGM, SA Gold), tailings retreatment (DRD Gold (DRD), Century Zinc), recycling (Columbus, Reldan, Metallix), and emerging green metals production (Keliber Lithium, Sandouville Nickel). This diversification is not accidental but strategic, designed to create what management calls an "antifragile" business—one that not only withstands shocks but improves through them.

The industry structure reveals why this matters. South Africa dominates global PGM production, but faces structural challenges: aging assets, declining ore grades, energy insecurity from Eskom, and labor intensity. The US PGM market offers insulation from these risks but operates at higher cost structures. Gold provides counter-cyclical ballast during economic uncertainty. Recycling offers low-capital exposure to critical metals with improving environmental regulations. Lithium and nickel position the company for the energy transition, albeit with development risk. Sibanye Stillwater sits uniquely at the intersection of these dynamics, with no direct peer matching its breadth.

Competitively, the company occupies a mid-tier position with distinctive advantages. Against pure-play South African PGM producers like Anglo American Platinum (ANGPY) and Impala Platinum (IMPUY), Sibanye offers geographic diversification that buffers against country-specific disruptions. Compared to Harmony Gold's (HMY) pure gold focus, the multi-commodity portfolio provides revenue stability. Northam Platinum's efficiency in underground mining exceeds Sibanye's, but lacks the US asset base and recycling platform. The company's moat lies not in scale but in strategic optionality—the ability to allocate capital across metals and geographies as cycles evolve.

Technology, Products, and Strategic Differentiation: The Integrated Platform Advantage

Sibanye Stillwater's core technology is not a single invention but an integrated platform spanning mining, processing, and recycling capabilities that competitors cannot easily replicate. The Columbus recycling facility in Montana, acquired with Stillwater, has evolved from a spare capacity efficiency initiative into the cornerstone of a strategic recycling business. This transformation matters because it provides exposure to PGMs, gold, silver, and copper at capital costs far below primary mining, with margins that remain steady through commodity cycles.

The recent acquisitions of Reldan (industrial/e-waste recycling) and Metallix (precious metals recycling) expand this capability into new waste streams and geographies. Reldan processed 8.6 million pounds of industrial scrap in H1 2025, generating $18 million in EBITDA, while Metallix adds scale, advanced processing technologies, and a logistics fleet extending sourcing reach across the US and into Mexico, India, the UK, South Korea, and Taiwan. This recycling convergence redefines what's possible in precious metals recovery, positioning Sibanye as a critical supplier for regional supply chains seeking security of supply and lower environmental footprints.

In primary mining, technological differentiation manifests through mechanization and digitalization. The Siphumelele-Bambanani mechanization project, approved in June 2025, targets cost reduction and access to previously sterilized resources. At US PGM operations, trials of a fully mechanized bolter at Stillwater East increase round height and length, potentially delivering more ounces per blast cycle while improving safety. Digital twin capability for mine planning enables trade-off optimization that was impossible with conventional methods. These initiatives are not one-quarter wonders but multi-year transformations that can drive costs below $1,000 per 2E ounce in the US, positioning operations in the middle of the industry cost curve versus being the highest-cost producer a year ago.

The by-product credits from chrome ore sales—ZAR 2.2 billion in H1 2025, albeit down 31% year-on-year—demonstrate how integrated operations create natural hedges. When PGM prices weaken, chrome revenues partially offset the impact, lowering net unit costs. This synergy is being enhanced through the Glencore (GLNCY)-Merafe joint venture to optimize chrome value from PGM operations, awaiting Competition Commission approval.

What does this technological integration mean for investors? It translates into pricing power through security of supply, margin expansion through cost reduction, and competitive positioning that becomes more durable as recycling volumes grow. The recycling business provides quick supply response to regional shortages, while mechanization and digitalization lower the cost base permanently. These are not temporary efficiencies but structural improvements to the earnings power of each ounce produced.

Financial Performance & Segment Dynamics: Evidence of Strategic Execution

Sibanye Stillwater's financial results provide clear evidence that the diversification and restructuring strategy is working, even if headline numbers appear mixed due to commodity price volatility and non-cash impairments. Group adjusted EBITDA increased 120% year-over-year to ZAR 15.1 billion in H1 2025, or 51% higher excluding Section 45X credits, demonstrating underlying operational improvement. The net debt to adjusted EBITDA ratio of 0.89x is well below the 1x target and far below market projections from earlier in the year, reflecting both earnings growth and disciplined capital allocation.

The South African PGM operations represent the company's most reliable cash generator. Production of 840,000 4E ounces in H1 2025 was 4% lower year-on-year, yet adjusted EBITDA held steady at ZAR 4.8 billion due to a 7% higher average basket price of ZAR 26,300 per 4E ounce and effective cost control. All-in sustaining costs of ZAR 23,900 per ounce remained within guidance of ZAR 23,500-24,500, with the Marikana K4 project ramping up and positively contributing to reduced unit costs. Management's commentary that operations are on track to achieve guidance for the third year running and eight out of nine years overall underscores the segment's consistency. With the PGM price improving 23% since May to ZAR 31,600 per 4E ounce, the outlook for H2 2025 is very positive.

US PGM operations show the most dramatic turnaround. Production of 141,000 ounces in H1 2025 came at an all-in sustaining cost of $1,207 per ounce, a 41% reduction from pre-restructuring levels and a 52% cut in total capital to $45 million. Adjusted EBITDA of $151 million returned the segment to positive earnings, supported by $159 million in Section 45X credits . The strategic goal to reduce costs below $1,000 per 2E ounce over the next 2-3 years appears achievable through mechanization, workforce optimization, and the trade-off work underway on mining cycles and tailings capacity. This positions the US assets competitively in the middle of the industry cost curve, a significant improvement from being the highest-cost producer a year ago.

South African gold operations delivered a mixed performance that highlights both the leverage to gold prices and operational challenges. The average gold price received increased 36% year-on-year to over ZAR 1.8 million per kilogram, driving adjusted EBITDA (including DRD Gold) up 118% to ZAR 4.8 billion, representing 48% of group adjusted EBITDA. However, production declined 13% to 9.3 tonnes, with Kloof operations significantly impacted by seismicity and infrastructure constraints during a transition from low-volume, high-grade to higher-volume, lower-grade mining. The decision to reduce production for safety reasons, while costly short-term, reflects management's priority on sustainable operations. Driefontein and Beatrix stabilized in Q2, with full-year guidance revised to 15-16 tonnes at all-in sustaining costs of ZAR 1.45-1.55 million per kilogram.

DRD Gold continues to provide reliable exposure to gold with minimal capital requirements. Production of 2.27 tonnes in H1 2025 was down 8% year-on-year, yet adjusted EBITDA increased 70% to ZAR 1.8 billion due to higher gold prices. The dividend payment of ZAR 0.40 per share, with ZAR 178 million accruing to Sibanye-Stillwater, demonstrates the segment's cash-generating capability.

The recycling business is becoming a more significant differentiator. Columbus delivered adjusted EBITDA of $129 million (including $126 million in Section 45X credits) despite subdued autocatalyst recycling markets, while Reldan contributed $18 million in EBITDA from processing 8.6 million pounds of industrial scrap. The Metallix acquisition, expected to close in September 2025, will add scale, advanced processing technologies, and a logistics fleet, further strengthening the recycling platform's ability to supply critical metals quickly and at low capital cost.

Australian operations performed well above expectations, producing 51,000 tonnes of payable zinc in H1 2025 (up 22% year-on-year) with unit costs 21% lower. Adjusted EBITDA of $36 million compared favorably to a $19 million loss in H1 2024, supported by an 11% higher zinc price and treatment charges less than 50% of prior year levels. The Mount Lyell copper project feasibility study is progressing well, with completion expected by year-end, offering future copper-gold exposure.

The Keliber lithium project in Finland represents the company's largest green metals bet but faces challenging market conditions. Construction is nearing completion with total CapEx of EUR 783 million, of which EUR 577 million has been spent. However, a 35% impairment was taken due to the depressed lithium price outlook, with spot prices around $9,000-11,000 per tonne making one-third of global supply unprofitable. Management is evaluating a "responsible start-up" to minimize losses, potentially through phased ramp-ups or securing competitive pricing. The project's strategic status under the EU Critical Raw Materials Act provides access to grants and tax credits, and its position as Europe's only integrated lithium refinery offers long-term optionality as the market rebalances toward deficits later this decade.

Sandouville nickel refinery in France is being ramped down to care and maintenance from January 2026, eliminating ongoing losses while the GalliCam pre-feasibility study explores pCAM production using a patented chlorine route. This reflects management's discipline in exiting sub-scale, loss-making operations while preserving optionality for future battery materials demand.

Outlook, Management Guidance, and Execution Risk

Management's guidance for the remainder of 2025 and into 2026 reveals a company focused on execution within its control while acknowledging external uncertainties. The South African PGM operations are expected to achieve full-year guidance for the third consecutive year, with the K4 ramp-up continuing to reduce unit costs. The outlook is very positive given the 23% improvement in PGM prices since May and the segment's consistent delivery.

US PGM operations have a clear pathway to reduce costs below $1,000 per 2E ounce over the next 2-3 years through mechanization, optimized mining cycles, and reduced capital intensity. Management expects to realize cash flow from 2023 and 2024 Section 45X filings in 2026, providing a balance sheet boost. The goal is to achieve positive cash flow at 2E prices in the $1,200-1,300 range, which appears achievable given current palladium prices and operational improvements.

South African gold guidance was revised downward to 15-16 tonnes for 2025 at all-in sustaining costs of ZAR 1.45-1.55 million per kilogram, reflecting Kloof's challenges. Management is finalizing a review of Kloof's long-term production profile, with expectations that historical output of 5-6 tonnes could halve based on safety-driven mining constraints. Driefontein and Beatrix are expected to contribute 8-8.5 tonnes and around 4 tonnes respectively going forward, with underground production stabilizing around 475,000-480,000 ounces annually. Capital expenditure is expected to remain roughly ZAR 3.5 billion per annum.

The Keliber lithium project's construction will complete in H1 2026, but the ramp-up timing remains uncertain. Management is working on different financial scenarios and risk management actions to mitigate losses during market weakness, with permits in place to start operations when conditions justify. This responsible approach prioritizes stakeholder value over production targets.

Balance sheet management remains a priority. The company is on track to refinance the 2026 $675 million notes in H1 2026, targeting a downsized $500 million issuance to reduce gross debt. The 2028 $500 million convertible bond is now "in the money" with the share price above the ZAR 24 conversion price. No interim dividend was declared due to global uncertainty, but management expressed confidence in returning to dividend-paying territory by year-end if commodity prices remain at current levels.

Risks and Asymmetries: What Could Break the Thesis

The central thesis faces several material risks that investors must monitor. South African operational risks remain the most significant threat. Kloof's seismicity and infrastructure challenges have already reduced production and may lead to a permanent halving of output. While management's safety-first approach is commendable, the financial impact is substantial—Kloof contributed nearly 50% of group earnings despite being slated for closure by 2020. Four fatalities in H1 2025, including one at Stillwater in July, underscore that mining remains inherently dangerous despite improvements in high-potential incident rates from 50-60 per month to below 10.

Energy insecurity in South Africa continues to pressure operations. Although the Castle Wind Farm generated ZAR 20 million in energy bill savings and reduced carbon footprint by 60,000 tonnes, 92% of group emissions originate from Eskom dependence. The renewable energy program targeting 600 megawatts by 2027 is essential but requires sustained execution.

Commodity price volatility creates earnings uncertainty. While PGM prices have recovered 23% since May, they remain well below 2022 peaks. The US is forecast to have slower GDP growth due to tariffs, reducing light vehicle sales by over 1 million units in 2025-2026, which directly impacts PGM demand. Russian palladium imports into the US increased 35% from 2022-2024 and another 50% in Q1 2025, with heavily subsidized material sold below market prices. This unfair competition prompted Sibanye to file antidumping and countervailing duty petitions, but resolution will take 13 months with preliminary determinations in 3-5 months.

Lithium market oversupply presents a different risk. At $9,000-11,000 per tonne, approximately one-third of global supply is unprofitable, and the Chinese government's capacity reduction efforts may not be sufficient to balance the market. Battery electric vehicle demand growth has slowed, exacerbated by the scheduled end of US tax credits in September 2025. While Sibanye forecasts a 10.7% CAGR for BEV production over the next decade and expects lithium deficits later in the decade, the timing of market rebalancing remains uncertain. Starting Keliber in current conditions could generate significant losses, but delaying ramp-up increases carrying costs and risks missing the upside.

Execution risk on major projects could derail the turnaround. The Kloof review may reveal that production potential is lower than current estimates. The US PGM cost reduction pathway to below $1,000 per ounce requires successful mechanization trials, tailings capacity management, and workforce optimization over 2-3 years. The Keliber ramp-up decision must balance stakeholder interests, including project financiers and offtake partners.

Valuation Context: Positioning at an Inflection Point

Trading at $3.10 per share, Sibanye Stillwater's valuation reflects a company in transition from turnaround to sustainable cash generation. The enterprise value of $9.98 billion and EV/EBITDA multiple of 9.64x positions it at a discount to pure-play PGM peers like Anglo American Platinum (20.03x) and Impala Platinum (19.45x), but this discount is warranted given the operational challenges and commodity mix.

The balance sheet provides a solid foundation for the thesis. Net debt to adjusted EBITDA of 0.89x is well below the 1x target and compares favorably to Anglo Platinum's higher leverage. Gross debt of ZAR 40.2 billion is offset by ZAR 21 billion in cash, with available liquidity approaching ZAR 47 billion including undrawn facilities. This financial flexibility is crucial for funding the remaining Keliber CapEx (EUR 206 million to complete) and completing the Metallix acquisition while maintaining optionality for counter-cyclical investments.

Profitability metrics appear weak due to non-cash impairments but underlying operations show improvement. The -0.17% operating margin and -3.18% profit margin are distorted by ZAR 4.2 billion in US PGM impairments from Section 45X phase-out accounting and ZAR 5.3 billion in Keliber impairments from lithium price revisions. Excluding these, normalized earnings support management's confidence in returning to dividend payments, with the payout policy unchanged at 25-35% of normalized earnings.

Cash flow-based multiples tell a more compelling story. The company generated ZAR 773 million in operating cash flow in H1 2025, with free cash flow turning positive at ZAR 213.5 million quarterly. This compares to negative ZAR 672 million annual free cash flow, indicating an inflection as restructuring benefits materialize. The Section 45X credits, valued at ZAR 12.6 billion through 2034, represent 32% of the original Stillwater acquisition value and provide tangible support for the US operations' cash generation.

Peer comparisons highlight Sibanye's unique positioning. Anglo Platinum's 12.12% gross margin and 6.93% operating margin reflect higher-cost underground operations without Sibanye's by-product credits and recycling income. Impala Platinum's 2.86% gross margin shows the pressure of pure-play PGM exposure. Harmony Gold's superior 39.65% gross margin and 29.67% operating margin demonstrate gold leverage but lack the diversification that stabilizes Sibanye's earnings through cycles.

The valuation implies a market skeptical of management's ability to execute the turnaround while commodity prices remain volatile. However, the combination of balance sheet strength, operational improvements, and strategic optionality in green metals suggests the market may be undervaluing the company's ability to generate cash through the cycle.

Conclusion: A Turnaround Entering Its Next Phase

Sibanye Stillwater's investment thesis centers on two interlocking themes: antifragile diversification that creates resilience across commodities and geographies, and operational discipline that is driving a measurable margin inflection despite cyclical headwinds. The company's 2013 origins as a gold turnaround specialist have evolved into a critical metals platform uniquely positioned to thrive in volatility while building optionality for the energy transition.

The evidence from H1 2025 supports this thesis. US PGM costs have fallen 41% through restructuring, SA PGM operations deliver consistent guidance for the third year running, and the balance sheet strength with 0.89x net debt/EBITDA provides firepower that leveraged pure-play peers lack. The recycling platform's expansion through Reldan and Metallix creates a steady-margin business that complements the cyclical mining operations, while Keliber offers long-term lithium exposure at minimal incremental cost.

What will determine success? Three variables stand out. First, the Kloof review must establish a sustainable, safe production profile that can contribute meaningfully to the 475,000-480,000 ounce annual underground target. Second, management must execute the US PGM cost reduction pathway to below $1,000 per ounce through mechanization and optimization, delivering positive cash flow at current palladium prices. Third, the lithium ramp-up decision must balance near-term losses against long-term positioning for market deficits expected later this decade.

The risks are material but manageable. South African operational challenges, commodity price volatility, and execution on major projects could derail progress. However, the company's "antifragile" culture—built through a decade of turning around distressed assets—suggests management is better equipped than most to navigate these challenges. With Neal Froneman transitioning to retirement and Richard Stewart taking the helm, the succession planning and experienced leadership team provide continuity.

Trading at $3.10, the market prices Sibanye as a troubled miner rather than a diversified critical metals platform entering a margin inflection. For investors willing to look through near-term impairments and commodity noise, the combination of operational turnaround, balance sheet strength, and strategic optionality offers an asymmetric risk/reward profile. The story is no longer about survival, but about how quickly management can convert operational improvements into sustainable cash generation and shareholder returns.