Company Quick10K Filing
Sibanye Gold
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 2,266 $5,530
20-F 2019-04-09 Annual: 2018-12-31
20-F 2018-04-02 Annual: 2017-12-31
20-F 2017-04-07 Annual: 2016-12-31
20-F 2016-03-21 Annual: 2015-12-31
20-F 2015-03-24 Annual: 2014-12-31
20-F 2014-04-29 Annual: 2013-12-31
20-F 2013-04-26 Annual: 2012-12-31
SBGL 2018-12-31
Part 1: Remuneration Committee Chairman’S Statement
Part 2: Remuneration Policy
Part 3 of This Remuneration Report Sets Out Some Analysis of How We Have Addressed This To Good Effect Over The Past Five Years.
Part 3: Implementation of The Remuneration Policy – 2018
EX-1.2 sbgl-20181231ex12032242e.htm
EX-4.36 sbgl-20181231ex43663445a.htm
EX-4.40 sbgl-20181231ex4400f6d50.htm
EX-4.44 sbgl-20181231ex444aafb3b.htm
EX-4.45 sbgl-20181231ex445d7c38b.htm
EX-4.46 sbgl-20181231ex4468f5d35.htm
EX-4.47 sbgl-20181231ex4471202c5.htm
EX-8.1 sbgl-20181231ex81c2b21e1.htm
EX-12.1 sbgl-20181231ex121d52433.htm
EX-12.2 sbgl-20181231ex122dcb13b.htm
EX-13.1 sbgl-20181231ex131a5f7c9.htm
EX-13.2 sbgl-20181231ex13233d2be.htm
EX-15.1 sbgl-20181231ex1510ca751.htm
EX-16 sbgl-20181231ex168e4a27e.htm

Sibanye Gold Earnings 2018-12-31

SBGL 20F Annual Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
AEM 6,846 5,256 1,846 0 0 0 0 7,378 0%
RGLD 6,707 2,544 374 423 179 262 496 6,808 42% 13.7 10%
SBGL 5,530 84,923 0 0 0 0 2,981 0%
AU 5,102 6,643 3,949 0 0 0 0 4,790 0%
BVN 4,371 4,217 1,188 0 0 0 0 4,371 0%
CLF 3,105 3,393 3,108 2,338 758 1,186 796 4,966 32% 6.2 35%
GFI 2,826 6,104 3,397 0 0 0 0 2,426 0%
NEXA 1,577 5,735 2,834 0 0 0 0 1,257 0%
NG 1,555 252 103 0 0 -107 -99 1,637 -16.6 -42%
CDE 871 1,677 831 610 -10 -109 24 1,180 -2% 49.6 -6%

20-F 1 sbgl-20181231x20f.htm 20-F sbgl_Current_Folio 20F

As filed with the Securities and Exchange Commission on 8 April 2019

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 20-F


(Mark One)

           REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

or

            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended 31 December 2018

or

           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

           SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                             to

Commission file number: 001-35785

Sibanye Gold Limited

(Exact name of registrant as specified in its charter)


Republic of South Africa
(Jurisdiction of incorporation or organization)
Constantia Office Park
Bridgeview House, Building 11, Ground Floor
Cnr 14th Avenue & Hendrik Potgieter Road
Weltevreden Park, 1709
South Africa
011-27-11-278-9600
(Address of principal executive offices)
With copies to:
Charl Keyter
Chief Financial Officer
Sibanye Gold Limited
Tel: 011-27-11-278-9700
Fax: 011-27-11-278-9863
Constantia Office Park
Bridgeview House, Building 11, Ground Floor
Cnr 14th Avenue & Hendrik Potgieter Road
Weltevreden Park, 1709
South Africa
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
and
Thomas B. Shropshire, Jr.
Linklaters LLP
Tel: 011-44-20-7456-3223
Fax: 011-44-20-7456-2222
One Silk Street
London EC2Y 8HQ
United Kingdom

Securities registered or to be registered pursuant to Section 12(b) of the Act

Title of Each Class

Ordinary shares of no par value each
American Depositary Shares, each representing four ordinary shares

Name of Each Exchange on Which Registered

New York Stock Exchange*
New York Stock Exchange

*Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock
as of the close of the period covered by the a
nnual report 

2,266,260,491 ordinary shares of no par value each

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes   No 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes   No 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company”  in Rule 12b-2 of the Exchange Act.

Large accelerated filer   Accelerated filer   Non-accelerated filer     Emerging growth company        

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP 

International Financial Reporting Standards as issued by the International Accounting Standards Board 

Other 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17   Item 18 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes   No 

 

 

 

 

 

 

 

 

 

 


 

Table of Contents

FORM 20-F CROSS REFERENCE GUIDE

[Note: To be revised as wrapper and annual report page numbers are finalised.]Picture 67Picture 66

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

1

 

Identity of directors, senior management and advisers

 

NA

 

NA

2

 

Offer statistics and expected timetable

 

NA

 

NA

3

 

Key information

 

 

 

 

 

 

(a)    Selected financial data

 

Annual Financial Report—Overview—Five-year financial performance

 

168-170

 

 

(b)    Capitalisation and indebtedness

 

NA

 

NA

 

 

(c)    Reasons for the offer

 

NA

 

NA

 

 

(d)    Risk factors

 

Further Information—Risk factors

 

270-294

4

 

Information on the Company

 

 

 

 

 

 

(a)    History and development of the Company

 

Integrated Annual Report—Introduction—Corporate profile

 

13-15

 

 

 

 

Further Information—Additional information—Memorandum of incorporation

 

352-355

 

 

 

 

Annual Financial Report—Ancillary information—Administration and corporate information

 

269

 

 

 

 

Integrated Annual Report—View from the top—Perspective from the Chair

 

19-21

 

 

 

 

Integrated Annual Report—View from the top—Chief Executive Officer’s review

 

22-28

 

 

 

 

Integrated Annual Report—View from the top—Chief Financial Officer’s report

 

29-31

 

 

 

 

Integrated Annual Report—Performance review—Delivering value from operations, projects and technology

 

50-59

 

 

 

 

Annual Financial Report—Overview—Five-year financial performance

 

168-170

 

 

 

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Factors affecting Sibanye-Stillwater’s performance—Recent acquisitions

 

175-176

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 13: Acquisitions

 

233-236

 

 

(b)    Business overview

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Introduction

 

171

 

 

 

 

Integrated Annual Report—Introduction—Corporate profile

 

13-15

 

 

 

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Factors affecting Sibanye-Stillwater’s performance

 

171-176

 

 

 

 

Annual Financial Report—Overview—Five-year financial performance

 

168-170

 

 

 

 

Integrated Annual Report—View from the top—Perspective from the Chair

 

19-21

 

 

 

 

Further Information—Environmental and regulatory matters

 

342-349

 

 

(c)    Organisational structure

 

Integrated Annual Report—Introduction—Corporate profile

 

13-15

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 1.3: Consolidation

 

210

 

 

(d)    Property, plant and equipment

 

Integrated Annual Report—Introduction—Corporate profile

 

13-15

 

 

 

 

Integrated Annual Report—Performance review—Minimising the environmental impact

 

98-115

 

 

 

 

Further Information—Information on the company—Sibanye-Stillwater’s mining operations

 

295-327

 

 

 

 

Further Information—Reserves of Sibanye-Stillwater as of 31 December 2018

 

328-337

 

 

Sibanye-Stillwater Form 20-F 2018

 1

 


 

Table of Contents

FORM 20-F CROSS REFERENCE GUIDE continued

[Note: To be revised as wrapper and annual report page numbers are finalised.]

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

 

 

Further Information—Environmental and regulatory matters

 

342-349

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 12: Property, plant and equipment

 

229-233

4A

 

Unresolved staff comments

 

NA

 

NA

5

 

Operating and financial review and prospects

 

 

 

 

 

 

(a)    Operating results

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements

 

171-189

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated income statement

 

202

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of financial position

 

203

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of cash flows

 

205

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 24: Borrowings and derivative financial instrument

 

246-255

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 31: Financial instruments and risk management

 

259-263

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 32: Commitments

 

263

 

 

(b)    Liquidity and capital resources

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Liquidity and capital resources

 

185-188

 

 

(c)    Research and development, patents and licences, etc.

 

NA

 

NA

 

 

(d)    Trend information

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Factors affecting Sibanye-Stillwater’s performance

 

171-176

 

 

(e)    Off-balance sheet arrangements

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Off balance sheet arrangements and contractual commitments

 

189

 

 

(f)     Tabular disclosure of contractual obligations

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Off balance sheet arrangements and contractual commitments

 

189

 

 

(g)   Safe harbour

 

Forward-looking statements

 

9

6

 

Directors, senior management and employees

 

 

 

 

 

 

(a)    Directors and senior management

 

Integrated Annual Report—Governance—Corporate governance and leadership—Our board, governance structures and processes

 

119-121

 

 

 

 

Integrated Annual Report—Governance—Corporate governance and leadership—Executive management

 

136

 

 

 

 

Further Information—Directors and executive management

 

338-341

 

 

(b)    Compensation

 

Integrated Annual Report—Governance—Remuneration report

 

138-166

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 34: Related-party transactions

 

264-265

 

 

(c)    Board practices

 

Integrated Annual ReportGovernance—Corporate governance and leadership—Our board, governance structures and processes

 

119-131

 

 

 

 

Integrated Annual Report—Governance—Remuneration report—Executive directors’ contracts of employment

 

151-152

 

 

(d)    Employees

 

Integrated Annual Report—Performance overview—Superior value for the workforce

 

60-75

 

 

Sibanye-Stillwater Form 20-F 2018

2

 


 

Table of Contents

FORM 20-F CROSS REFERENCE GUIDE continued

[Note: To be revised as wrapper and annual report page numbers are finalised.]

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

(e)    Share ownership

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 34: Related-party transactions

 

264-265

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 6: Share-based payments

 

217-222

7

 

Major Shareholders and Related Party Transactions

 

 

 

 

 

 

(a)    Major shareholders

 

Annual Financial Report—Ancillary information—Shareholder information

 

267-268

 

 

(b)    Related party transactions

 

Annual Financial Report—Accountability—Directors’ report—Directors’ and officers’ disclosure of interests in contracts

 

197-198

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 34: Related-party transactions

 

264-265

 

 

(c)    Interests of experts and counsel

 

NA

 

NA

8

 

Financial information

 

 

 

 

 

 

(a)    Consolidated statements and other financial information

 

Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements

 

171-189

 

 

 

 

Annual Financial Report—Consolidated financial statements

 

202-266

 

 

 

 

Annual Financial Report—Director’s Report—Litigation

 

198-199

 

 

 

 

Annual Financial Report—Accountability—Directors’ report—Financial affairs—Dividends

 

195

 

 

 

 

Further Information—Financial information—Dividend policy and dividend distributions

 

350

 

 

(b)    Significant changes

 

Further Information—Additional Information—Recent developments

 

355

9

 

The Offer and listing

 

 

 

 

 

 

(a)    Listing details

 

Further Information—The listing

 

351

 

 

(b)    Plan of distribution

 

NA

 

NA

 

 

(c)    Markets

 

Further Information—The listing

 

351

 

 

(d)    Selling shareholders

 

NA

 

NA

 

 

(e)    Dilution

 

NA

 

NA

 

 

(f)     Expenses of the issue

 

NA

 

NA

10

 

Additional information

 

 

 

 

 

 

(a)    Share capital

 

NA

 

NA

 

 

(b)    Memorandum and articles of association

 

Further Information—Additional information—Memorandum of Incorporation

 

352-355

 

 

(c)    Material contracts

 

Further Information—Additional information—Material contracts

 

355-358

 

 

(d)    Exchange controls

 

Further Information—Additional information—South African Exchange Control limitations affecting Security holders

 

363

 

 

 

 

Further Information—Environmental and regulatory matters—Exchange Controls

 

349

 

 

(e)    Taxation

 

Further Information—Additional information—Taxation

 

363-366

 

 

(f)     Dividends and paying agents

 

NA

 

NA

 

 

(g)    Statement by experts

 

NA

 

NA

 

 

(h)    Documents on display

 

Further Information—Additional information—Documents on display

 

366

 

 

(i)    Subsidiary information

 

NA

 

NA

11

 

Quantitative and qualitative disclosures about market risk

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 31.2: Risk management activities

 

260-263

12

 

Description of securities other than equity securities

 

 

 

 

 

 

Sibanye-Stillwater Form 20-F 2018

3

 


 

Table of Contents

FORM 20-F CROSS REFERENCE GUIDE continued

[Note: To be revised as wrapper and annual report page numbers are finalised.]

 

 

 

 

 

 

 

Item

 

Form 20-F Caption

 

Location in this document

 

Page

 

 

(a)    Debt securities

 

NA

 

NA

 

 

(b)    Warrants and rights

 

NA

 

NA

 

 

(c)    Other securities

 

NA

 

NA

 

 

(d)    American depositary shares

 

Further Information—Additional information—American depositary shares

 

358-362

13

 

Defaults, dividend arrearages and delinquencies

 

NA

 

NA

14

 

Material modifications to the rights of security holders and use of proceeds

 

NA

 

NA

15

 

Controls and procedures

 

Further Information—Controls and procedures

 

368-369

16A

 

Audit Committee financial expert

 

Integrated Annual Report—Governance—Corporate governance and leadership—Our Board and its committees—Audit Committee

 

126

16B

 

Code of ethics

 

Integrated Annual Report—Governance—Corporate governance and leadership—Ethical and responsible leadership—Ethics in action

 

116

16C

 

Principal accountant fees and services

 

Annual Financial Report—Accountability—Report of the Audit Committee—Auditor independence and fees

 

193

16D

 

Exemptions from the listing standards for audit committees

 

NA

 

NA

16E

 

Purchase of equity securities by the issuer and affiliated purchasers

 

None

 

 

16F

 

Change in registrant’s certifying accountant

 

Further information—Change in registrant’s certifying accountant

 

370

16G

 

Corporate governance

 

Further Information—Additional information—JSE corporate governance practices compared with NYSE Listing Standards

 

367

16H

 

Mine safety disclosure

 

Further Information—Environmental and regulatory matters—Mine safety disclosure

 

344

17

 

Financial statements

 

NA

 

NA

18

 

Financial statements

 

Annual Financial Report—Accountability—Report of independent registered public accounting firm

 

200-201

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated income statement

 

202

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of other comprehensive income

 

202

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of financial position

 

203

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of changes in equity

 

204

 

 

 

 

Annual Financial Report—Consolidated financial statements—Consolidated statement of cash flows

 

205

 

 

 

 

Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements

 

206-266

19

 

Exhibits

 

Exhibits

 

371-373

 

 

 

 

 

 

Sibanye-Stillwater Form 20-F 2018

4

 


 

Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Historical consolidated financial statements

Sibanye Gold Limited (trading as Sibanye-Stillwater (Sibanye-Stillwater)) is a South African domiciled global, precious metals mining company, which produces a mix of metals that includes gold and the platinum group metals (PGMs). Sibanye-Stillwater owns and operates a portfolio of high-quality operations and projects, which are grouped into two regions: the southern Africa region and the United States region. See Annual Financial Report—Overview—Management’s discussion and analysis of financial statements—Introduction.

Accordingly, the books of account of the Group (as defined below) are maintained in South African Rand and the Group’s annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, as prescribed by law. These financial statements are distributed to shareholders and are submitted to the Johannesburg Stock Exchange (JSE) and the New York Stock Exchange (NYSE).

The consolidated financial statements of Sibanye-Stillwater as at and for the fiscal years ended 31 December 2018, 2017 and 2016 (the Consolidated Financial Statements) have been prepared using the historical results of operations, assets and liabilities attributable to Sibanye-Stillwater and all of its subsidiaries (the Sibanye-Stillwater Group, or the Group). The Consolidated Financial Statements have been prepared under the historical cost convention, except for financial assets and financial liabilities (including derivative financial instruments), which are measured at fair value through profit or loss or through the mark to market reserve in equity.

Non-IFRS measures

The financial information in this annual report includes certain measures that are not defined by IFRS, including “adjusted earnings before interest, tax, depreciation and amortisation” (adjusted EBITDA), “normalised earnings”, “operating costs”, “All-in sustaining costs”, “All-in sustaining cost margin”, “All-in costs”, “All-in cost margin”, “headline earnings per share”, “adjusted free cash flow” and “net debt” (each as defined below or in Annual Financial Report—Overview—Five-year financial performance). These measures are not measures of financial performance or cash flows under IFRS and may not be comparable to similarly titled measures of other companies. These measures have been included for the reasons described below or in Annual Financial Report—Overview—Five-year financial performance and should not be considered by investors as alternatives to costs of sales, net operating profit, profit before taxation, cash from operating activities or any other measure of financial performance presented in accordance with IFRS.

Operating costs is defined as the average cost of production and calculated by dividing the cost of sales, before amortisation and depreciation in a period by the tonnes milled/treated in the same period, and operating cost per kilogram (and ounce) is calculated by dividing the cost of sales, before amortisation and depreciation in a period by the gold produced in the same period. See Annual Financial Report—Overview—Five-year financial performance—Group operating statistics—Footnote 1.

The Group reports adjusted EBITDA based on the formula included in the facility agreements for compliance with the debt covenant formula. See Annual Financial Report—Overview—Five-year financial performance—Group operating statistics—Footnote 2 for more information and Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 24.11: Capital management for a reconciliation of (loss)/profit before royalties and tax to adjusted EBITDA. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue. See Annual Financial Report—Overview—Five-year financial performance—Group operating statistics—Footnote 3.

All-in costs is made up of All-in sustaining costs, being the cost to sustain current operations, given as a sub-total in the All-in costs calculation, together with corporate and major capital expenditure growth. See Annual Financial Report—Overview—Five-year financial performance—Group operating statistics—Footnote 4 for more information and Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—2018 financial performance compared with 2017 and 2016—Cost of sales—All-in costs for a reconciliation of cost of sales, before amortisation and depreciation to All-in costs. All-in sustaining cost margin is defined as revenue minus All-in sustaining costs divided by revenue. All-in cost margin is defined as revenue minus All-in costs divided by revenue. See Annual Financial Report—Overview—Five-year financial performance—Group operating statistics—Footnote 5.

Net debt represents borrowings, that have recourse to Sibanye-Stillwater, and bank overdraft less cash and cash equivalents. See Annual Financial Report—Overview—Five-year financial performance—Group financial statistics—Footnote 4 and Annual Financial Report—Consolidated financial statements—Notes to the consolidated financial statements—Note 24.11: Capital management.

Free cash flow is defined as cash flows from operating activities before dividends paid, less additions to property, plant and equipment. Management considers free cash flow to be an indicator of cash available for repaying debt, funding exploration and paying dividends. See Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements—Liquidity and capital resources—Cash flow analysis for a reconciliation of net cash from operating activities to adjusted free cash flow.

Conversion rates

Certain information in this annual report presented in Rand has been translated into US dollars. Unless otherwise stated, the conversion rate for these translations is R14.35/US$1.00, which was the closing rate on 31 December 2018. By including the US dollar equivalents, Sibanye-Stillwater is not representing that the Rand amounts actually represent the US dollar amounts shown or that these amounts could be converted into US dollars at the rates indicated.

 

 

Sibanye-Stillwater Form 20-F 2018

 5

 


 

Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION continued

The Acquisitions of Lonmin, Stillwater, the Rustenburg operation and Aquarius

Lonmin acquisition

On 14 December 2017, the boards of Sibanye-Stillwater and Lonmin plc (Lonmin) announced that they had reached agreement on the terms of a recommended all-share offer pursuant to which Sibanye-Stillwater, and/or a wholly-owned subsidiary of Sibanye-Stillwater, would acquire the entire issued and to be issued ordinary share capital of Lonmin, which is a major mine-to-market producer of PGMs with core operations in South Africa (the Lonmin Acquisition). Under the terms of the Lonmin Acquisition, each Lonmin shareholder will be entitled to receive 0.967 new Sibanye-Stillwater shares for each Lonmin ordinary share that they hold. The Lonmin Acquisition is proposed to be effected by means of a scheme of arrangement between Lonmin and Lonmin’s shareholders under Part 26 of the UK Companies Act. The Lonmin Acquisition is subject to the satisfaction or waiver of a number of conditions, as set out in the announcement published pursuant to Rule 2.7 of the UK City Code on Takeovers and Mergers. Since the announcement of the Lonmin Acquisition, certain of these conditions have been satisfied, namely the receipt of approval from the Financial Surveillance Department of the South African Reserve Bank (SARB), as announced by Sibanye-Stillwater and Lonmin on 15 May 2018, and competition authority clearance in the United Kingdom, as announced by Sibanye-Stillwater and Lonmin on 28 June 2018. On 21 November 2018, it was announced that the South African Competition Tribunal had approved the Lonmin Acquisition, subject to certain specific conditions imposed on Sibanye-Stillwater, however an appeal against the South African Competition Tribunal’s decision was subsequently filed with the Competition Appeal Court of South Africa by the Association of Mineworkers and Construction Union (AMCU) on 19 December 2018. On 15 January 2019, it was announced that, in light of such appeal, Sibanye-Stillwater and Lonmin had agreed (with the consent of the UK Takeover Panel) to extend the longstop date for the scheme of arrangement relating to the Lonmin Acquisition to become effective, from 28 February 2019 to 30 June 2019. On 25 January 2019, Sibanye-Stillwater and Lonmin announced that the Competition Appeal Court of South Africa had set 2 April 2019 as the date for hearing the appeal. The appeal was heard on 2 April 2019 and the Competition Appeal Court of South Africa’s decision is awaited. The references to the Competition Appeal Court of South Africa’s hearing of the appeal in the Integrated Annual Report and Annual Financial Report herein should be read in conjunction with this statement.

The Lonmin Acquisition remains subject to the satisfaction or waiver of a number of other conditions, including (but not limited to) the approval of Lonmin shareholders and Sibanye-Stillwater shareholders and the approval of the scheme of arrangement by the High Court of Justice in England & Wales. It is expected that the Lonmin scheme document and Sibanye-Stillwater shareholder circular in connection with such shareholder approvals will be published in due course.

On 14 December 2017, a co-operation agreement was entered into between Sibanye-Stillwater and Lonmin in connection with the Lonmin Acquisition. Amongst other things, the co-operation agreement records the process by which Sibanye-Stillwater and Lonmin have agreed to co-operate in relation to certain clearances and regulatory conditions in connection with the Lonmin Acquisition, confirms certain matters in relation to the scheme and the Lonmin shareholder meetings and Sibanye-Stillwater shareholder meetings as well as certain matters relating to Lonmin’s share schemes.

Stillwater acquisition

On 9 December 2016, Sibanye-Stillwater announced it had reached a definitive agreement to acquire Stillwater Mining Company (Stillwater) for US$18 per share in cash, or US$2,200 million in aggregate (the Stillwater Transaction). On 25 April 2017, at the shareholders meeting of Sibanye-Stillwater, the Sibanye-Stillwater shareholders approved the proposed Stillwater Transaction by voting in favour of the various resolutions to give effect to the Stillwater Transaction and at the shareholders meeting of Stillwater, the requisite majority of Stillwater shareholders resolved to approve the Stillwater Transaction. Sibanye-Stillwater obtained control of Stillwater on this date. The effective date of the implementation of the Stillwater Transaction was 4 May 2017, when Sibanye-Stillwater took over legal ownership of Stillwater.

The Rustenburg operation acquisition

On 9 September 2015, Sibanye-Stillwater announced that it entered into an agreement with Rustenburg Platinum Mines Limited (RPM), a wholly owned subsidiary of Anglo American Platinum Limited (Anglo American Platinum) to acquire the Bathopele, Siphumelele (including Khomanani), and Thembelani (including Khuseleka) mining operations, two concentrating plants, an on-site chrome recovery plant, the Western Limb Tailings Retreatment Plant, associated surface infrastructure and related assets and liabilities on a going concern basis (the Rustenburg operation) (the Rustenburg operation Transaction). On 19 October 2016, Sibanye-Stillwater obtained consent in terms of section 11 of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) for the transfer of the mining right and prospecting right pursuant to the Rustenburg operation Transaction. The effective date of the implementation of the Rustenburg operation Transaction was 1 November 2016, when Sibanye-Stillwater took over legal ownership and management of the Rustenburg operation.

Aquarius acquisition

On 6 October 2015, Sibanye-Stillwater announced a cash offer of US$0.195 per share for the entire issued share capital of Aquarius Platinum Limited (Aquarius) (the Aquarius Transaction and, together with the Rustenburg operation Transaction, the Stillwater Transaction and the proposed Lonmin Acquisition, the Acquisitions). Aquarius owns stakes in the Kroondal mine and Platinum Mile retreatment facilities near Rustenburg in South Africa and the Mimosa joint venture with Impala Platinum Holdings Limited (Implats) in Zimbabwe. The Aquarius Transaction completed on 12 April 2016, when Sibanye-Stillwater paid R4,301.5 million to the Aquarius shareholders and obtained control of Aquarius.

 

 

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION continued

Market information

This annual report includes industry data about Sibanye-Stillwater’s markets obtained from industry surveys, industry publications, market research and other publicly available third-party information. Industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Sibanye-Stillwater and its advisers have not independently verified this data.

In addition, in many cases statements in this annual report regarding the gold and PGM mining industry, and Sibanye-Stillwater’s position in these industries have been made based on internal surveys, industry forecasts, market research, as well as Sibanye-Stillwater’s own experiences. While these statements are believed by Sibanye-Stillwater to be reliable, they have not been independently verified.

 

 

 

 

 

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DEFINED TERMS AND CONVENTIONS

In this annual report, all references to “we”, “us” and “our” refer to the Sibanye-Stillwater and the Sibanye-Stillwater Group, as applicable.

In this annual report, all references to “fiscal 2019” and “2019” are to the fiscal year ending 31 December 2019, all references to “fiscal 2018” and “2018” are to the audited fiscal year ended 31 December 2018, all references to “fiscal 2017” and “2017” are to the audited fiscal year ended 31 December 2017, and all references to “fiscal 2016” and “2016” are to the audited fiscal year ended 31 December 2016.

In this annual report, all references to “South Africa” are to the Republic of South Africa, all references to the “United States” and “US” are to the United States of America, its territories and possessions and any state of the United States and the District of Columbia, all references to the “United Kingdom” and “UK” are to the United Kingdom of Great Britain and Northern Ireland, all references to “Zimbabwe” are to the Republic of Zimbabwe, all references to “Canada” are to the Dominion of Canada and all references to “Argentina” are to the Republic of Argentina.

In this annual report, all references to the “DMR” are references to the South African Department of Mineral Resources, the government body responsible for regulating the mining industry in South Africa.

In this annual report, gold and PGM production figures are provided in kilograms, which are referred to as “kg”, or in troy ounces, which are referred as “ounces” or “oz”. Ore grades are provided in grams per metric ton, which are referred to as “grams per ton” or “g/t”. All references to “tons”, “tonnes” or “t” in this annual report are to metric tons.

In this annual report, “R”, “Rand” and “rand” refer to the South African Rand and “Rand cents” and “SA cents” refers to subunits of the South African Rand, “$”, “US$”, “US dollars” and “dollars” refer to United States dollars and “US cents” refers to subunits of the US dollar, “£”, “GBP” and “pounds sterling” refer to British pounds and “pence” refers to the subunits of the British pound.

This annual report contains references to the “total recordable injury frequency rate” (TRIFR). TRIFR includes the total number of fatalities, lost time injuries, medically treated injuries and restricted work injuries per million man hours.

 

 

 

 

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FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the US Securities Exchange Act of 1934 (the Exchange Act) with respect to our financial condition, results of operations, business strategies, operating efficiencies, competitive position, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters.

These forward-looking statements, including, among others, those relating to our future business prospects, revenues and income, the potential benefit of the Acquisitions (including statements regarding growth, cost savings, benefits from and access to international financing and financial re-ratings), PGM pricing expectations, levels of output, supply and demand, information relating to Sibanye-Stillwater’s underground Blitz PGM project adjacent to the east of the existing Stillwater Mine designed to explore, define and extract the PGM resource along the far eastern extent of the J-M Reef (the Blitz Project), and estimations or expectations of enterprise value, adjusted EBITDA and net asset values wherever they may occur in this annual report and the exhibits to this annual report, are necessarily estimates reflecting the best judgement of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this annual report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

·

changes in the imposition of regulatory costs and relevant government regulations, particularly environmental, tax, health and safety regulations and new legislation affecting water, mining, mineral rights and business ownership, including any interpretation thereof which may be subject to dispute;

·

economic, business, political and social conditions in South Africa, Zimbabwe, the United States, the United Kingdom and elsewhere;

·

the further downgrade of South Africa’s credit rating;

·

the ability of Sibanye-Stillwater to comply with requirements that it operates in a sustainable manner and provide benefits to affected communities;

·

the occurrence of hazards associated with underground and surface gold, PGMs and uranium mining;

·

the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance;

·

uncertainty regarding the title to any of Sibanye-Stillwater’s properties;

·

Sibanye-Stillwater’s ability to implement its strategy and any changes thereto;

·

plans and objectives of management for future operations;

·

the success of Sibanye-Stillwater’s business strategy, exploration and development activities;

·

Sibanye-Stillwater’s future financial position, plans, strategies, objectives, capital expenditures, projected costs and anticipated cost savings, financing plans, debt position and its ability to reduce debt leverage;

·

changes in the market price of gold, PGMs and/or uranium;

·

fluctuations in exchange rates, currency devaluations, inflation and other macro-economic monetary policies;

·

the ability of Sibanye-Stillwater to comply with loan and other covenants and restrictions and difficulties in obtaining additional financing or refinancing;

·

Sibanye-Stillwater’s ability to service its bond instruments (including high yield bonds and convertible bonds);

·

the occurrence of labour disruptions and industrial actions;

·

changes in assumptions underlying Sibanye-Stillwater’s estimation of its current mineral reserves;

·

power disruption, constraints and cost increases;

·

Sibanye-Stillwater’s ability to hire and retain senior management or sufficient technically skilled employees, as well as its ability to achieve sufficient representation of historically disadvantaged South Africans (HDSAs) in its management positions;

·

the ability to achieve anticipated efficiencies and other cost savings in connection with, and the ability to successfully integrate, past, ongoing and future acquisitions, as well as at existing operations;

·

the ability of Sibanye-Stillwater to complete any ongoing or future acquisitions;

·

supply chain shortages and increases in the price of production inputs;

·

the adequacy of Sibanye-Stillwater’s insurance coverage;

·

failure of Sibanye-Stillwater’s information technology and communications systems;

·

the outcome and consequence of any potential or pending litigation or regulatory proceedings or environmental, health or safety issues;

·

operating in new geographies and regulatory environments where Sibanye-Stillwater has no previous experience;

·

Sibanye-Stillwater’s ability to achieve steady state production at the Blitz Project;

·

Sibanye-Stillwater’s ability to obtain the benefits of any streaming arrangements or pipeline financing;

·

the availability, terms and deployment of capital or credit; and

·

the impact of HIV, tuberculosis and other contagious diseases.

The foregoing factors and others described under “Risk Factors” should not be construed as exhaustive. There are other factors that may cause our actual results to differ materially from the forward-looking statements. Moreover, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors. We cannot assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.

We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.

 

 

 

 

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INTEGRATED ANNUAL REPORT

 

Picture 12

 

Contents

 

 

INTRODUCTION

 

 

12

About this report

 

 

13

Corporate profile

 

 

17

Our strategy

 

 

VIEW FROM THE TOP

 

 

19

Perspective from the Chair

 

 

22

Chief Executive Officer’s review

 

 

29

Chief Financial Officer’s report

 

 

32

Managing our risks and opportunities

 

 

46

Stakeholder engagement

 

 

PERFORMANCE REVIEW

 

 

50

Delivering value from operations, projects and technology

 

 

60

Superior value for the workforce

 

 

76

Ensuring safe production

 

 

83

Occupational health and well-being

 

 

95

Social upliftment and community development

 

 

98

Minimising the environmental impact

 

 

GOVERNANCE

 

 

116

Corporate governance and leadership

 

 

138

Remuneration report

 

Our full set of 2018 reports, produced for the financial year from 1 January 2018 to 31 December 2018, covers Sibanye-Stillwater’s progress and achievements in delivering on our strategic objectives and commitment to creating stakeholder value.

 

 

 

 

 

 

 

 

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ABOUT THIS REPORT

APPROACH AND PHILOSOPHY

This integrated report, our primary report to stakeholders, adopts an integrated approach to describing the operational, financial and sustainability performance (see Annual Financial Report—Overview—Five-year financial performance) and activities of Sibanye Gold Limited (trading as Sibanye-Stillwater) for the period from 1 January 2018 to 31 December 2018.

This report is intended to assist stakeholders to make informed decisions on Sibanye-Stillwater’s ability to create sustained value in the long term. It provides insight into our strategy, our business and performance, and the progress made in delivering on our strategic objectives and our commitment to creating stakeholder value over the past year. We report on those matters we consider to be most material to Sibanye-Stillwater’s sustainability, operational, financial and strategic performance. Underlying this is our commitment to ensuring that our decisions are made according to, and underpinned by, our CARES values.

This integrated report complies with the International Integrated Reporting Council’s framework on integrated reporting, the King IV Report on Corporate Governance for South Africa, 2016 (King IV), and the South African Companies Act 71 of 2008 (as amended).

In compiling this report, we have aligned with the Global Reporting Initiative (GRI) Standards and have taken into account the International Council on Mining and Metals (ICMM) guiding principles as well as the 10 Principles of the United Nations Global Compact.

In this report, we attempt to provide stakeholders with relevant information that would enable an assessment of the way our mining activities in 2018 created value, improved lives and achieved other strategic objectives. In so doing, we give an account of challenges encountered and successes achieved, the impact of our activities, and of those factors and risks, both in the external environment and internally, that have had an impact on our ability to achieve our strategic objectives and to create superior value in the past year. The process to determine the most material of these risks, together with identifying our opportunities, is described in Managing our risks and opportunities.

SCOPE AND BOUNDARY

The scope and boundary of this report take into account the Group’s organisational structure (see —Corporate profile) implemented to enhance and ensure delivery on our strategic operating objectives. Annual comparative data is provided where applicable. For the 2018 financial year, annual data is provided where possible by region, type of operation and at group level. Note that the annual data provided at group-level for 2014 and 2015 in this report is comparable to that for the South Africa (SA) gold operations for 2016 – 2018. Where data for previous years has been restated, this is indicated.

Any material events occurring post year-end and before the date of approval by the Board are reported in this report.

AUDIENCE

While the principal audience for this report is investors and shareholders, we recognise that there are other stakeholders who have varied and specific information requirements, many of which we address, despite not producing a separate sustainable development report. Instead all non-financial reporting is either included in this integrated report or is available on the website, where referenced.

This report is intended to enable stakeholders to determine whether the material issues identified will affect the sustainability of Sibanye-Stillwater’s business and its ability to create and sustain value in the short, medium and long term.

ASSURANCE

Sibanye-Stillwater’s internal audit function provides an objective evaluation of the Group’s internal control processes and systems devised to mitigate business risks and has ensured the accuracy of the information presented.

Internal audit is a management function.

 

 

 

 

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CORPORATE PROFILE

Sibanye-Stillwater is an independent, global, precious metals mining company producing a unique mix of metals that includes platinum group metals (PGMs) and gold.

Domiciled and with its head office in South Africa, Sibanye-Stillwater owns and operates a portfolio of high-quality global operations, processing facilities and projects made up as follows:

 

 

United States (US) PGM operations

The East Boulder and the Stillwater (including Blitz) mines are located in Montana, in the United States. The Columbus Metallurgical Complex, which smelts the material mined to produce PGM-rich filter cake, also recycles PGMs from autocatalysts.

Southern Africa (SA) PGM operations

The Kroondal, Rustenburg and Platinum Mile operations are located on the western limb of the Bushveld Complex in South Africa, while the Mimosa joint venture is situated on the southern portion of the Great Dyke in Zimbabwe. Platinum Mile is a retreatment facility, which reprocesses arisings from Rustenburg.

South Africa (SA) gold operations

The Driefontein, Kloof and Cooke surface operations and associated processing facilities are located on the West Rand of the Witwatersrand Basin, while Beatrix is in the southern Free State goldfields. Sibanye-Stillwater also has an interest in surface tailings retreatment facilities located from the East Rand to the West Rand through our 38.05% stake in DRDGOLD Limited (DRDGOLD).

Picture 2

Projects

Our projects include:

·

The Marathon PGM project in Ontario, Canada

·

The Altar and Rio Grande copper-gold projects in the Andes in north-west Argentina, close to the Chilean border

·

The Hoedspruit, Zondernaam and Vygenhoek, PGM projects in South Africa

·

The Burnstone and the southern Free State gold projects in South Africa

OPERATING FRAMEWORK

Our operating framework is underpinned by strong, ethical corporate governance that is based on the principles of accountability, transparency, competence, responsibility, fairness and integrity, which are fundamental to the long-term sustainability of our business and to sustained value creation for all stakeholders. These principles, which are implicit in and integral to our CARES values, are applied in the management of our business and in engaging with and reporting to shareholders and other stakeholders. Our governance structures, processes and policies, together with our code of ethics, underpin execution of our strategy and support our business model.

OUR HISTORY

Following the unbundling by Gold Fields of its South African gold assets (other than South Deep) in 2013 to form Sibanye Gold Limited, the Company has transformed geographically and by metal produced – from being a South African gold mining company to an internationally competitive, diversified precious metals miner producing gold and the full suite of PGMs.

With the acquisition of the Stillwater Mining Company in May 2017, Sibanye Gold was rebranded as Sibanye-Stillwater.

 

 

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COrporate PROFILE continued

In line with our strategy, we have continued to advance the proposed acquisition of Lonmin plc (Lonmin), which was initially announced towards the end of 2017.

Sibanye-Stillwater also has a 38.05% stake in DRDGOLD, following the vending of certain of Sibanye-Stillwater’s surface gold tailings facilities and processing assets into that company. DRDGOLD is a world leader in the retreatment of gold tailings.

OPERATIONAL PROFILE 
A SNAPSHOT

 

 

 

 

US PGM operations

 

 

 

 

Units

2018
2017

No. of operating mining units1

 

2
2

Production of mined PGMs

2E Moz

0.59
0.38

Contribution to group PGM production

%

34
21

Contribution to group revenue

%

31
20

Contribution to adjusted EBITDA2

%

50
24

Mineral Reserves

2E Moz

25.6
21.9

Fatalities

 

0
0

LTIFR3

Per million hours worked

9.97
7.80

 

 

 

 

 

SA PGM operations

 

 

 

 

Units

2018
2017

No. of operating mining units4

 

4
4

Production of mined PGMs

4E Moz

1.2
1.2

Contribution to group PGM production

%

66
68

Contribution to group revenue

%

30
29

Contribution to adjusted EBITDA2

%

34
18

Mineral Reserves

4E Moz

20.4
22.4

Fatalities

 

3
2

LTIFR3

Per million hours worked

4.68
4.69

 

 

 

 

 

SA gold operations

 

 

 

 

Units

2018
2017

No. of operating mining units5

 

4
4

Production of gold

Moz

1.2
1.4

Contribution to group revenue

%

39
51

Contribution to adjusted EBITDA2

%

16
59

Mineral Reserves

Moz

16.6
25.7

Fatalities

 

21
9

LTIFR3

Per million hours worked

6.52
6.33

1 Includes Stillwater and East Boulder mines

2 The Group reports adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) based on the formula included in the facility agreements for compliance with the debt covenant formula. For a reconciliation of profit/loss before royalties and tax to adjusted EBITDA, refer to the relevant notes in the condensed consolidated interim financial statements

3 Lost-time injury frequency rate

4 Includes Kroondal (50% attributable pool and share agreement with Anglo American Platinum), Rustenburg operation, Platinum Mile (91.7% stake in this operation which treats chrome tailings to recover PGMs) and Mimosa (50:50 joint venture with Impala Platinum Holdings which manages this operation)

5 Includes Driefontein, Kloof, Beatrix, Cooke surface sources and DRDGOLD

6 Excludes ounces from recycling operation

 

 

 

 

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Picture 13

Picture 22

Picture 15

 

 

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COrporate PROFILE continued

LISTINGS AND SHAREHOLDER INFORMATION

 

 

Sibanye-Stillwater has its primary listing on the JSE, South Africa, where it is included in the FTSE/JSE Responsible Investment Index. The company is also listed on the NYSE, with its shares quoted as American Depositary Receipts (ADRs). For further details, see Stakeholder engagement.

As at 31 December 2018:

  Our biggest shareholder was Gold One at 20.06% while the three largest institutional shareholders were the Public Investment Corporation (9.87%), Exor Investments UK (8.15%) and Investec Asset Management (5.00%)

  Our market capitalisation was R22.7 billion (US$1.6 billion) (2017: R34.3 billion; US$2.8 billion) (2016: R23.6 billion; US$1.7 billion)

Picture 17

OUR PRODUCTS

Platinum group metals

Gold

Other

At our PGM operations in South Africa and Zimbabwe, the primary PGMs produced are platinum, palladium and rhodium, which together with gold, are referred to as 4E (3PGM+Au). Production by ratio is approximately 58% platinum (Pt), 32% palladium (Pd), 8% rhodium (Rh) and 2% gold (Au). The PGM-bearing ore mined here is processed to produce PGMs-in-concentrate, which is currently processed and refined by third parties.

The US PGM operations primarily produce palladium and platinum (78% palladium and 22% platinum), referred to as 2E (or 2PGM). The PGM-bearing ore mined is processed and smelted to produce a PGM-rich filter cake. A third party refines the filter cake to produce refined PGMs.

The major sources of demand for PGMs are for use in autocatalysts and jewellery. Combined, these two areas accounted for around 69%1 of gross platinum and palladium demand in 2018. Autocatalysts alone accounted for 40%1 of gross platinum demand and for 85%1 of gross palladium demand in 2018.

Sibanye-Stillwater mines, extracts and processes gold-bearing ore at its SA gold operations to produce a beneficiated product, doré, which is then refined at Rand Refinery Proprietary Limited into gold bars with a purity of at least 99.5% in accordance with the London Bullion Market Association’s standards of Good Delivery. Sibanye-Stillwater holds a 44% interest in Rand Refinery, one of the largest refiners of gold globally, and the largest in Africa. Rand Refinery markets and sells refined gold on international markets to customers around the world.

The main sources of demand for gold are as a store of value (such as central bank holdings), as an investment (exchange traded funds, bars and coins), jewellery and for various industrial purposes.

At our PGM operations in both regions, the minor PGMs – iridium and ruthenium – are produced as co-products. They, together with the three primary PGMs, are referred to as 6E (5PGM+Au).

In addition, at the SA region’s PGM operations, nickel, copper and chrome, among other minerals, are produced as by-products.

1 Source: Johnson Matthey

 

 

 

 

 

 

 

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OUR PURPOSE, VISION AND STRATEGY

 

 

We care about safe production, our stakeholders, our environment, our company and our future, and live our values. Our values underpin all that we do – all the decisions we make, how we conduct our business, our actions and behaviour.

OUR PURPOSE

Our mining improves lives

OUR VISION

Superior value creation for all our stakeholders through the responsible mining and beneficiation of our mineral resources

OUR STRATEGY

To deliver on our vision and purpose, we aim to consolidate and strengthen our competitive position as a leading international precious metals company

See —Introduction—Our strategy—Delivering on our strategy

Picture 18

 

 

 

 

 

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OUR STRATEGY

DELIVERING ON OUR STRATEGY

We have defined five strategic focus areas, designed to strengthen our position as a leading, international precious metals mining company. Our strategic focus is on creating stakeholder value.

We aim to do this by seeking to ensure that we have in place a values based organisational culture that:

·

supports our strategy

·

focuses on employee safety and health as well as operational excellence

·

ensures consistent delivery on our commitments

·

is led from the top by a trusted, high-performing leadership

Our aim is to position Sibanye-Stillwater optimally in global capital markets to enable us to deliver on our strategy and to pursue value-accretive growth. In recent years, strategic development has encompassed diversification by commodity and by region.

Timeline of value-accretive growth

April 2016: Initial foray into the SA PGM sector with acquisition of Aquarius Platinum (Kroondal, Mimosa and Platinum Mile)

November 2016: Followed by acquisition of our Rustenburg operations. Delivered ~R1 billion of annual synergies from these two transactions, well ahead of schedule

May 2017: Entry into US PGM sector with acquisition of Stillwater Mining Company

December 2017: Announced proposed acquisition of Lonmin – significant potential synergies with existing SA PGM operations and aligned with our mine-to-market strategy (completion expected during 2019)

February 2019: Acquisition of SFA (Oxford) announced – will contribute institutional knowledge of the broader fundamentals and outlook for PGMs and high-tech metals and their use in future technologies

 

 

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OUR STRATEGY continued

 

2018: What we did

2019: What we plan to do

Establishing a values-based culture

See —Chief Executive Officer’s review

  Emphasised our core CARES values, which also underpin our enhanced safety strategy and framework

  Emphasised the importance of leadership’s example in living our values

  Grow leadership capability to foster culture of CARES, based on trust

  Strengthen our values-based decision making culture

  Advance strengths of leadership personnel

  Ensure continued robustness of leadership succession plans

Focus on safe production and operational excellence

See Performance review—Delivering value from operations, projects and technology,   Performance review—Ensuring safe production and Performance review —Occupational health and well-being

  Enhanced senior leadership structure to better support production delivery and drive organisational priorities

  Secured strong adjusted EBITDA ahead of expectations from our PGM operations accounting for 84% of Group adjusted EBITDA in 2018

  Enhanced safety framework and restored our benchmark safety record in medium to deep-level hard-rock mining following aberrational safety incidents in the first half of 2018

  Continued Blitz production ramp-up

  Continue to entrench enhanced safety strategy and framework

  Reposition SA gold operations for sustained profitability and growth

  Maintain positive performance at PGM operations in South Africa and the United States and sustain Blitz ramp-up

  Make progress towards increased formal accreditation under responsible mining codes and strengthening our environmental, social and governance (ESG) credentials

  Encourage leadership qualities necessary to achieve innovative operating and leadership excellence

Deleveraging our balance sheet

See —View from the Top —Chief Financial Officer’s report

  Concluded stream financing agreement, providing an alternative source of financing to buy-back bonds, which reduced debt repayment obligations and annual coupon costs significantly

  Refinanced and increased revolving credit facility to improve liquidity

  Generate strengthened cash flow through focus on operating effectiveness and business improvement, in particular leveraging off opportunities enabled through digitalisation, in a strengthening commodity price environment

  Transition to toll refining arrangement at our SA PGM operations boosting revenue and cash flow

  Target 1.5x for the net debt to adjusted EBITDA ratio

Addressing our South African discount

See —View from the Top —Chief Financial Officer’s report

  Our geographic diversification has resulted in an increasing portion of our adjusted EBITDA being generated outside of South Africa – 50% in 2018 versus 24% in 2017 – a consequence of the growing significance of the US PGM operations within the Group

  Improvements in policy quality and regulatory certainty have been secured in the South African mining sector as evidenced by the 2018 Fraser Survey findings

  Enhance the operating context for effective safe production delivery, building on commitments to competitiveness, growth and transformation through meaningful social compacting in an improving policy and regulatory environment

Pursuing value-accretive growth

See —View from the Top—Chief Executive Officer’s review and — Performance review—Delivering value from operations, projects and technology

 

  Consolidated benefits derived from acquisitions with a balanced commodity and geographic footprint

  Lonmin transaction progressed towards conclusion  as the fourth step of our PGM strategy to provide full mine to metal access in South Africa

  Concluded transaction to acquire 38.05% of DRDGOLD through the vending of certain surface sources to DRDGOLD thus retaining optionality to their upside

  Progressed acquisition of SFA (Oxford) to enhance access to strategic market intelligence around powertrain evolution, energy trends and related minerals

  Conclude the Lonmin acquisition and secure benefits of integration and mine to metal market access

  Prepare for future strategic growth opportunities by:

     Deepening investigation into potential of high-tech metals

     Crystallising target acquisition pipeline

 

 

 

 

 

 

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PERSPECTIVE FROM THE CHAIR

 

It is again my privilege to report to all our stakeholders on the progress made by the Group during 2018. Despite the significant vicissitudes and challenges that we had to contend with during the past year, I am pleased to report that we have emerged from this difficult period in a robust state with the appropriateness of our carefully considered strategy to diversify, geographically and by commodity, already proven.

Specific challenges, which impacted on our SA gold operations, persisted at the end of the year. I am confident though that the careful and forthright management of these will result in a satisfactory and progressive outcome with our organisation poised to benefit from a constructive global climate for precious metals prices.

Elsewhere in this report, our CEO, Neal Froneman, discusses in detail the challenges that occurred and other developments that characterised our overall performance during the past year. I will, therefore, confine my review to those aspects that determined and affected our operating environment.

It is impossible to reflect on 2018 without recognising the tragic safety incidents, which occurred in the first half of 2018. The health and safety of Sibanye-Stillwater’s employees is our key priority. This unparalleled sequence of tragic events, which resulted in the deaths of our colleagues, traumatised and consumed everyone at Sibanye-Stillwater. The Board and management of Sibanye-Stillwater again extend their deepest condolences to the dependants and loved ones of the deceased employees. We will continue to provide appropriate support as required.

These tragic events were inconsistent with Sibanye-Stillwater’s historical safety performance and it has been heartening to observe the manner in which management responded to the Group-wide crisis. As a result of swift short-term measures by management and other stakeholders, and the subsequent implementation of longer-term safe production initiatives, which are described in more detail later in this report, Sibanye-Stillwater’s industry leading safety performance was re-established and improved in H2 2018.

On 1 March 2019, the Group recorded more than seven million fatality-free shifts since mid-August 2018, and on 6 March 2019, the SA gold and PGM operations combined, also achieved seven million fatality-free shifts. Both these milestones were record performances for these operations. These are commendable achievements considering the deep levels at which a significant proportion of our mining is conducted across the Group, and the number of people who operate in this environment on a daily basis. These achievements are in stark contrast to what we experienced in the first half of 2018. (See Further Information—Additional information—Recent developments.)

While this performance has restored and improved on Sibanye-Stillwater’s historical industry-leading safety record, we are conscious that we operate in a dynamic environment, which can change rapidly. As such we require continual vigilance, review and innovation to ensure ongoing improvement towards our ultimate goal of zero harm in the workplace. While the reduction in injury rates since August 2018 gives us confidence that the safety enhancement programmes we have implemented are proving effective, we remain focused on maintaining our position as the benchmark safety performer in the South African gold and PGM mining industries.

Following the unbundling by Gold Fields and establishment of the organisation as an independently listed entity on 11 February 2013, the management of Sibanye-Stillwater was successful in the turnaround of the mature gold assets we inherited in 2013 into strongly cash-generative operations, with significantly extended operating lives. This facilitated the transition of the Group into a multi-commodity, precious-metals mining company. This was initially achieved through the acquisitions of the Aquarius and Rustenburg platinum operations in 2016 and, subsequently, the acquisition of the high-quality US-domiciled Stillwater Mining Company (Stillwater) in 2017. Sibanye-Stillwater became a globally diversified precious-metals producer with a unique commodity mix and truly international geographic footprint.

The transformative Stillwater acquisition not only secured exposure to low-cost primary palladium-rich assets and significant production growth from the Blitz project at an attractive stage in the PGM price cycle but also included a world-class precious-metals processing and recycling business, giving it direct access to PGM end-user markets, which is of strategic significance.

Picture 1

Our continued belief and commitment to our long-term future in South Africa was underscored by the announcement, in December 2017, of our intention to acquire Lonmin. The integration of Lonmin into our existing SA PGM business, is expected to unlock additional value for stakeholders, including through the realisation of attractive synergies, and overhead and processing synergies with Lonmin’s PGM processing smelting and refining operations. This would complement and strengthen our existing SA PGM mine-to-market strategy, which was also recently achieved through the transition of the processing arrangement for our Rustenburg operation’s PGM concentrate with Anglo American Platinum, from a Purchase of Concentrate (PoC) arrangement to a toll processing arrangement from 1 January 2019. These are key components in delivering the fifth element of our planned growth trajectory illustrated above.

 

 

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PERSPECTIVE FROM THE CHAIR continued

While the operating environment in South Africa remains challenging, with the uncertain outlook for the unstable state utility Eskom posing the greatest risk to industry sustainability, the transition in leadership of the ANC, and subsequently the South African government, in late 2017 and early 2018 respectively, has ushered in a renewed sense of optimism in the outlook for the South African economy and the industry.

Indeed, the initial signs following this transition have been generally positive. The government has a renewed commitment to economic growth with President Ramaphosa actively pursuing a target of US$100 billion in new investment. There also seems to be a greater commitment to addressing regulatory shortcomings and tackling under-delivery of services and mismanagement at state-owned enterprises.

Unfolding revelations of deep-rooted and widespread corruption have threatened to cloud these positive signs as political manoeuvring by radical and vocal elements within the ANC and the opposition parties, feeds ongoing uncertainty. However, the commitment expressed by the government to root out corruption, and the transparent manner in which the various commissions of enquiry have been allowed to progress, is extremely positive. It may be too early to firmly say that South Africa is back on the path of progress it embarked upon in 1994 but, for the first time in a decade, the outlook for South Africa seems more positive.

For the South African mining industry, specifically the appointment of Gwede Mantashe, a mining veteran who understands the complexities of the industry, as Minister of Mineral Resources in early 2018, has improved relations between the industry and the regulators across the board. Among the first initiatives undertaken by Minister Mantashe was the redrafting of the punitive Mining Charter gazetted by the previous Minister in mid-2016, which had largely undermined the confidence needed to encourage new investment and reinvestment in the country’s mines. The more inclusive and consultative approach has delivered a revision of the Mining Charter, which, while not perfect, is much-improved.

The general improvement in relations between the South African mining industry and its regulatory authorities is welcome. The continuation of this more co-operative and collaborative policy and regulatory environment suggests a more constructive outlook for future investment and growth in the local mining industry.

Sadly, though relations with organised labour and communities remain strained. The triple developmental challenges of unemployment, inequality and poverty in South Africa, which have been compounded by a slowdown in growth and poor service delivery, pose a significant threat to social stability in South Africa, and directly threaten the sustainability of the mining industry. The mining industry’s ability to continue to shoulder an ever-increasing responsibility to deliver services and infrastructure to communities is limited and uncompetitive, and needs to be addressed with some urgency.

Investors cite the complex and often hostile industrial relations environment in South Africa as a significant impediment to investment. The militant actions taken by some unions, which should be representing the interests of workers, are perplexing and destructive. The strike called by the Association of Mineworkers and Construction Union (AMCU) on 21 November 2018 at our SA gold operations is a clear case in point of negotiating in bad faith.

This strike interrupted the emerging recovery in the operational performance of our SA gold operations following significant disruptions in the first half of 2018. While ostensibly related to the wage negotiations that began in July 2018, we continue to believe that this violent protest action is not in the best interests of all stakeholders, particularly the workers. The strike has continued into 2019 with the union raising legal and procedural challenges in order to maintain and extend the protected status of the strike. While management plans have been implemented across the operations in order to mitigate the impact of the strike action, our SA gold operations are affected to varying extents.

Throughout the strike, we continued to pursue all avenues to bring this unhelpful strike action to an end and ensure the well-being of our employees. On 20 March 2019, the Labour Court of South Africa held that the gold wage extension agreement concluded on 18 February 2019 with the National Union of Mineworkers (NUM), UASA and Solidarity, and extended to AMCU and other non-unionised employees, is valid and lawful in terms of Section 23(1)(d) of the Labour Relations Act 66 of 1995 (S23(1)(d)). As a result of the legally binding nature of the extension agreement, the Company proceeded with an independent verification process to confirm the various unions’ level of representivity required to implement the extension agreement. The court judgement provides a clear path forward to resolving the ongoing strike in a manner that does not compromise our values or undermine our other stakeholders who have also been negatively impacted by the AMCU strike action.

Irrespective of the strike action, certain business units at the SA gold operations have experienced ongoing losses due to rising input costs and other operational factors. Restructuring has become imperative to establish a sustainably profitable operating footprint. This led to Sibanye-Stillwater giving notice on 14 February 2019, in terms of Section 189A of the Labour Relations Act, that it would be commencing formal consultations with employees and other stakeholders regarding possible restructuring of specific business units at its SA gold operations.

Our strategic focus is unchanged, with ongoing improvements in safe production and optimisation of our operational performance at our existing operations. A critical step in achieving this key objective will be the successful integration of Lonmin following the completion of the transaction. Delivery of these operational imperatives, along with higher prevailing precious metals prices, should accelerate Group deleveraging, which is a necessary step in addressing market concerns, and facilitate a rerating in relative value.

The Group’s growth in the PGM markets provided an informed view of automobile markets, specifically positioning the Group to understand and project future powertrain scenarios in relation to internal combustion engines, hybrid electric, battery electric and fuel cell-powered vehicles. The continued understanding of both automobile market forces and analysis of likely advances in battery and powertrain technologies will provide Sibanye-Stillwater with an opportunity to continue to leverage off this knowledge base in order to position Sibanye-Stillwater to play an ongoing, significant role in delivery of metals necessary for future powertrain requirements to the market.

To support the implementation of this strategic positioning and continued delivery of value to stakeholders, Sibanye-Stillwater has agreed to acquire SFA (Oxford), pending certain conditions. SFA is an established analytical consulting company that is a globally recognised authority on PGMs and has, for several years, provided in-depth market intelligence on battery materials and precious metals for industrial, automotive, and smart city technologies. The acquisition cost compares favourably to the cost of setting up a similar analytical and research group internally but significantly leapfrogs the time required to build up the intellectual knowledge.

 

 

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PERSPECTIVE FROM THE CHAIR continued

I am convinced that Sibanye-Stillwater offers tangible fundamental value and is strategically positioned to benefit from any further upside in precious metals prices.

It is imperative that I express my gratitude to my fellow directors for their guidance and wisdom in what was a very challenging year for the Group. I welcome Harry Kenyon-Slaney to our Board. He has extensive experience in the mining sector – in South Africa and internationally – and his expertise in health and safety, as well as business transformation programmes, will be invaluable.

Finally, it would be remiss not to thank the members of the Sibanye-Stillwater management team, particularly Neal Froneman. Under his leadership, the management team has worked tirelessly and methodically to create and build a diversified and sustainable business that stands high in the ranks of its industry. They have dealt effectively, confidently and candidly with the challenges they have faced. After dealing comprehensively with unprecedented challenges during 2018, I look forward to observing the Group going from strength to strength.

 

 

Sello Moloko

Chairman

29 March 2019

 

 

 

 

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chief executive OFFICER’s review

Sibanye-Stillwater has undergone many fundamental changes since it was established in February 2013, transforming from a gold only producer with three mines in South Africa into a globally diversified precious metals producer with operations and projects in five jurisdictions. Following the completion of the proposed acquisition of Lonmin, the Group will rank as one of the largest primary producers of platinum and palladium, and associated PGMs, in the world.

What has not changed, however, is our commitment to our purpose, vision and values. We are positive that our mining improves lives and our vision to create superior value for all stakeholders is unwavering with all of our decisions and actions underpinned by our CARES values. Of these values – commitment, accountability, respect, enabling and safe production – our first, second and third priority is safe production and the safety, health and well-being of our employees. The tragic incidents at our SA gold operations, in the first half of the year therefore had such a harrowing impact on the Group as a whole.

The manner in which the Sibanye-Stillwater team responded to and dealt with the various crises, which led to a recovery and improvement in the Group’s safety performance in the second half of the year, is extremely pleasing. I am confident that we are well-positioned to continue delivering superior value to all of our stakeholders and improving lives through our mining activities.

SAFETY

The anomalous spate of tragic safety incidents that we primarily experienced at the SA gold operations in the first eight months of 2018, which resulted in the deaths of 24 of our colleagues in South Africa, is unprecedented in the history of our organisation and contrary to our previous industry leading safety performance.

Two separate incidents in particular, at our Driefontein and Kloof operations, resulted in the disastrous loss of 12 of our colleagues. The first, a seismic event at Driefontein’s Masakhane shaft on 3 May 2018, resulted in severe damage to the workings. While six employees were thankfully rescued, seven of our employees were fatally injured. Soon after this incident, on 11 June 2018 at our Kloof Ikamva shaft, five employees succumbed to heat exhaustion when a shift boss inexplicably led his team into a temporarily suspended and appropriately barricaded area, contrary to company policies. These incidents remain subject to investigations by the Department of Mineral Resources and we are assisting the regulators with those investigations.

We continue to mourn the 24 colleagues we lost in 2018 and our heartfelt condolences go to the families, friends and colleagues of Chicco Elmon Dube, Solly Ngobeni, Matela Mating, Zanempi Mncwanazi, Otshepeng Ernest Ramosito, Ntokozo Elias Ntame, Mlungisi Vukuthi, Luke Bongumusa Mngomezulu, Baptista Paulino Cuambe, X-Mas Madikizela, Mbulelo Albert Sonqowa, Thabo Abram Ntsekhe, Nkosiphendule Dudlela, Luis Ernesto, Lumbe Gazala, Lingani Innocent Mngadi, Lakhi Msada, Mthokozisi Msutu, Cedrick Nkuna, Kholekile Phelile, Thokozani Tembe, Bhekithemba Thembinkosi Ndabeni, Grace Mlambo and Philemon Mngakana. Our deceased colleagues remain in our thoughts and we will continue doing what is appropriate and right to support the dependants of the deceased.

In response to the crisis, we took immediate, well-defined steps to enhance the safety performance at our SA gold operations in particular. Near-term, high-impact measures were vigorously implemented across the operations and medium- to long-term safe production initiatives were developed, including inter alia:

·

the development of a Zero Harm Strategic Framework through multi-stakeholder collaboration during three safety summits, which were convened by Sibanye-Stillwater – the safety summits are ongoing while joint implementation task teams monitor and report on progress made in the priority areas that were jointly identified by stakeholders at the summits

·

the constitution of our Global Safe Production Advisory Panel, comprising five leading globally recognised safety experts, to assist in adopting a more forward-looking position that anticipates the emergence of new leading safety practices

·

investing in the identification and development of new safe production technologies through the DigiMine partnership with the University of Witwatersrand, complemented by a “Virtual Centre of Excellence in Innovative Safe Production”, which is made up of a global academic network of 19 leading mine safety experts who will contribute to enhancing modernisation for safe and sustainable production

Taking into consideration the substantial behavioural component involved in many fatal incidents in the mining industry, the desire to review our organisational culture and leadership to ensure that safety is inculcated as the foremost consideration in decisions at all levels, was identified as a continued priority. In this regard, a core strategic thrust over the course of the next three years will be to further develop a values-based organisational culture that supports safe production and delivery of our strategy by continuing to instil our CARES values as the context within which we make all our decisions as a cornerstone of culture transformation.

For further detail on what is being done to ensure our workplaces are safe, and to address safety behaviour and performance, see — Performance review—Ensuring safe production and —Performance review—Occupational health and well-being.

The initial outcomes of these initiatives have been heartening with the safety performance in the second half of 2018, across the Group, in stark contrast to that of the first half. The Group operations have been fatality-free since mid-August 2018, recording a total of seven million fatality-free shifts by 1 March 2019, with the SA operations also achieving seven million fatality-free shifts on 6 March 2019. (See Further Information—Additional information—Recent developments.Group combined injury rates were essentially flat year-on-year with a slight deterioration in injury rates at the SA gold operations and the US PGM operations, offset by a significant improvement in injury rates at the SA PGM operations where the serious injury frequency rate (SIFR) improved by 15% – in the process setting new benchmarks for moderate to deep-level hard-rock mining in South Africa. These are commendable achievements considering the proportion of deep-level mining that is conducted across the Group and the number of people who operate in this environment on a daily basis.

 

 

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CHIEF EXECUTIVE OFFICER’S REVIEW continued

This performance has restored and improved Sibanye-Stillwater’s historic, industry-leading safety record but we are conscious that we operate in a dynamic environment, which can change rapidly, as we experienced in H1 2018, and as such, requires continuous vigilance, review and innovation to ensure ongoing improvement towards our ultimate goal of zero harm in the workplace. Consistent with our comprehensive approach and commitment to safe production, following the unfortunate tailings dam failure in Brazil, we have concluded additional audits of our tailings storage facilities globally – no immediate risks have been identified.

FINANCIAL REVIEW

As a result of the critical impact of the safety incidents and other unanticipated operational disruptions as well as the strike (as referred to by our Chairman in the preceding pages) on production at our SA gold operations, the Group delivered a under par financial performance in 2018. Our strategic commodity diversification into the PGM sector and the geographical benefits of the Stillwater acquisition clearly compensated for the operational challenges experienced at the SA gold operations however, with Group adjusted EBITDA only R676 million (7%) lower year-on-year despite adjusted EBITDA from the SA gold operations declining by R3,946 million for the same period.

The Group’s major source of earnings is now our US PGM operations, which accounted for approximately 50% of Group adjusted EBITDA of R8,369 million (US$632 million) in 2018 compared with R9,045 million (US$680 million) in 2017, primarily due to the increasing dollar palladium price and strong PGM operational performance. The higher rand PGM basket price and sustained operational performance from the SA PGM operations also resulted in the contribution from the SA PGM operations increasing substantially from 18% of Group adjusted EBITDA in 2017 to 34% in 2018. The SA gold operations contributed only 16% of Group adjusted EBITDA in 2018 compared with 59% in 2017.

Picture 75

Consistent with our three-year strategic goals, proactive steps to address our balance sheet leverage were also taken during the year with the US$500 million stream transaction, secured in July, of which the largest portion was successfully applied towards reducing US$400 million of long-term debt. Significant progress on our deleveraging strategy was, however, delayed by the sharp decline in adjusted EBITDA from our SA gold operations in 2018 with the Group’s net debt to adjusted EBITDA (net debt to adjusted EBITDA) ratio of 2.5x at the end of 2018 only marginally improved on the position at the end of 2017. Having secured an extension of the 3.5x net debt to adjusted EBITDA ceiling until the end of 2019 and a covenant holiday for Q1 2019, we have sufficient headroom on our lender covenants and our liquidity remains adequate. Ongoing strength in spot precious metals prices in 2019 is expected to support our deleveraging efforts in the coming year.

Group adjusted free cash flow was similarly impacted by the operational disruptions experienced by the SA gold operations. The Group recorded negative free cash flow of R12 million (US$1 million) for 2018, which was an R851 million (US$64 million) improvement relative to the comparable period in 2017 with negative free cash flow of R1,093 million (US$83 million) from the SA gold operations, offset by a tenfold increase in free cash flow from the SA PGM operations to R881 million (US$67 million) and free cash flow from the US PGM operations of R387 million (US$29 million), which was significantly higher than negative free cash flow of R483 million (US$36 million) for 2017. The significant increase in precious metals prices in 2019 thus far, if sustained, will have extremely positive implications for Group free cash flow in 2019.

OPERATIONAL REVIEW

US PGM operations

Mined 2E PGM production for the year of 592,608 2Eoz was towards the upper end of guidance for the year, reflecting the ongoing build-up of production at Blitz and record production from the East Boulder mine with All-in-sustaining cost (AISC) of US$677/2Eoz in line with annual guidance.

The Columbus Metallurgical Complex performed steadily in 2018, processing 619,683oz of mined 2E PGM and 686,592oz of recycled 3E PGM, despite the rebuild and expansion of the second electric furnace (EF2) restricting processing flexibly. Recommissioning of EF2 in January 2019 will add smelter capacity and significantly enhance flexibility for the rest of the year. The recycling division averaged 22.0 tonnes of feed material per day in 2018, compared with an average feed rate of 24.2 tonnes per day in 2017. This was a noteworthy achievement, given the smelting constraints experienced by the complex during the year.

 

 

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After regressing in the first half of 2018, the palladium price regained its momentum in August 2018 with palladium and rhodium ending the year strongly. The 9% year-on-year increase in the average 2E PGM basket price received to US$1,007/2Eoz, coupled with the strong operating performance, boosted adjusted EBITDA from the US PGM operations for 2018 to US$314 million (R4,152 million) from US$161 million (R2,143 million) in 2017 with the adjusted EBITDA margin of the underground operations increasing from 43% for 2017 to 46% for 2018 and the adjusted EBITDA margin for the US PGM operations as a whole (including the lower margin recycling operations) increasing from 23% for 2017 to 26% for 2018. The continued rise in the palladium spot price in 2019, which increased by 37% from an average PGM basket price for 2018 of US$1,007/2Eoz to a spot price of US$1,375/2Eoz, if maintained will have a considerable enhancement to profitability from the US PGM operations.

The production build-up at Blitz remains on schedule with three stope blocks successfully commissioned in 2018. Two additional stopes are scheduled for commissioning in 2019, which are expected to add a further 40,000 2Eoz to 60,000 2Eoz to annual production. A total of 10 producing areas or stopes are expected to be commissioned at Blitz by late 2021, adding 300,000 2Eoz of annual production, on average, from 2022.

Continuous improvement and optimisation of operational performance is a core focus area across the Group and incremental expansion of production at the East Boulder mine, the Fill the Mill (FTM) project, was recently approved by our Board. The FTM project is expected to deliver approximately 40,000oz of 2E PGM annually from late 2020 through incremental expansion of mining and certain support facilities at the East Boulder mine and Columbus Metallurgical Complex with the additional production from FTM expected to reduce operating costs at East Boulder by approximately 5% over the project’s 10-year operating life.

SA PGM operations

The SA PGM operations continued to perform strongly with full-year 4E PGM production of 1,175,672oz for the year ended 31 December 2018, exceeding the upper limit of guidance, and average AISC well below the lower guidance limit of R10,750/4Eoz (US$825/4Eoz).

Despite ongoing weakness in the platinum price, the average 4E PGM basket price of R13,838/4Eoz (US$1,045/4Eoz) in 2018 was 10% higher than it was in 2017, primarily due to significant increases in palladium and rhodium prices (which comprise approximately 31% and 9% of the 4E prill split respectively) and a weaker rand exchange rate.

The significant leverage of the SA PGM operations to the higher basket prices, as a result of a disciplined operating performance, is evident in the 67% year-on-year increase in adjusted EBITDA to R1,881 million (US$136 million) for H2 2018. Similarly, adjusted EBITDA for the full year of R2,882 million (US$218 million) was 81% higher than it was in 2017 with the adjusted EBITDA margin increasing from 12% in 2017 to 19% in 2018. As with the US PGM operations, at the spot 4E PGM basket price of R17,670/4Eoz at close of day on 6 March 2019, the proforma adjusted EBITDA from the SA PGM operations would have been approximately 100% higher at R3,812 million (US$268 million).

Impact of changes to processing arrangements for Rustenburg operation from 1 January 2019

In line with Sibanye-Stillwater’s mine-to-market PGM strategy and according to the processing agreements with Anglo American Platinum, the processing arrangement for Rustenburg production changed from a PoC arrangement to a toll processing arrangement from 1 January 2019.

In terms of the PoC arrangement, Sibanye-Stillwater delivered metals concentrate from the Rustenburg operation to Anglo American Platinum for smelting and refining and Anglo American Platinum retained a percentage of the metal-in-concentrate as payment for processing the concentrate. The cost of this PoC charge was offset against revenue and reflected as an equivalent discount to the 4E PGM basket price received.

In terms of the toll arrangement, Sibanye-Stillwater will pay an agreed rate to Anglo American Platinum to smelt and refine concentrate from the Rustenburg operation but will own and sell all the refined metal produced. From a reporting perspective, Sibanye-Stillwater will no longer reflect a discount in its revenue and will receive the full average 4E PGM basket price although costs and unit costs will be higher than under the PoC arrangement, reflecting the additional tolling costs.

At the current spot 4E PGM basket price, the net result of this contractual change has a positive financial impact with the increased revenue more than offsetting the additional toll cost and, as a result, beneficial commercially and strategically. The change in the arrangement, however, results in a delay in the recognition of revenue due to the point of sale being extended to the end of the processing pipeline, which affects the recognition of revenue for 2019.

Under the PoC arrangement, a sale was recognised and accounted for on delivery of concentrate to Anglo American Platinum as the control transferred to Anglo American Platinum pursuant to the sales contract. The sale price was previously determined on a provisional basis and adjustments to the sale price were made, based on movements in the metal prices up to the date of final pricing. Under the toll arrangement, a sale will only be accounted for after the refined metals are sold, approximately four months after delivery of the concentrate to Anglo American Platinum. From an accounting perspective, this is the point when the control is transferred to the customer.

This change has resulted in:

·

the revenue recognition cycle being delayed with minimal revenue and earnings recognised from the Rustenburg operation during Q1 2019 and an associated deferral of the recognition of costs

·

a permanent increase in inventory and a similar reduction in trade receivable balances so the net impact on working capital is minimal

·

cash flow is largely unaffected

As a result of these changes, adjusted EBITDA from the Rustenburg operation will not be recognised during Q1 2019, which will impact our net debt to adjusted EBITDA leverage ratio during the transition of the commercial arrangements. Following further discussions with our lenders, a covenant holiday for Q1 2019 has been agreed. We consequently have sufficient headroom on our lender covenants and liquidity remains adequate.

 

 

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CHIEF EXECUTIVE OFFICER’S REVIEW continued

SA gold operations

As announced on 1 August 2018, all conditions precedent to the DRDGOLD transaction were met and the transaction was implemented on 31 July 2018. Sibanye-Stillwater consolidated DRDGOLD in its operating and financial results from 1 August 2018 and the current operating results include 1,870kg (60,122oz) from DRDGOLD.

Total gold production, including DRDGOLD, declined by 16% year-on-year to 36,600kg (1,176,700oz) primarily due to the impact of the anomalous H1 2018 safety incidents and other operational disruptions (the disruption of electrical power to the Beatrix operations and seismic damage to infrastructure at the Driefontein 1 and Kloof 3 shafts) and the AMCU strike in the second half of the year, as well as cessation of underground mining at the Cooke operations in late 2017, which accounted for 956kg (30,736oz) or 32% of the reduction. On a like-for-like basis, gold production (excluding DRDGOLD and the Cooke underground operations) also declined by 16% year-on-year to 34,676kg (1,114,800oz).

The impact of the 16% decline in production year-on-year is evident in the 15% increase in AISC for 2018 to R557,530/kg (US$1,309/oz) despite cost of sales before amortisation and depreciation (including DRDGOLD and the Cooke underground operations) remaining flat year-on-year.

The significant fixed overhead cost component (over 80% of operating costs) for the SA gold operations makes costs very sensitive to production volume changes. As a result, unit costs such as AISC invariably increase with reductions in production volumes.

The average received rand gold price for 2018 of R535,929/kg (US$1,259/oz) was flat year-on-year. Combined with the significant decline in production, this resulted in adjusted EBITDA from the SA gold operations declining to R1,362 million (US$103 million) from R5,309 million (US$399 million) in 2017.

Section 189A

While the profitability of the SA gold operations is currently distorted by the production impact of the safety incidents and ongoing strike action, there are fundamental profitability issues, particularly at the Driefontein 2, 6, 7 and 8 shafts and at Beatrix 1 shaft. These will be addressed through consultation with stakeholders in terms of Section 189A of the Labour Relations Act. Notice in this regard was given to stakeholders on 14 February 2019.

This follows notices issued under Section 52(1)(a) of the Mineral and Petroleum Resources Development Act in October 2018 in respect of Beatrix and Driefontein, advising stakeholders of the marginal profitability of the mining rights that should have prompted engagements with the stakeholders on each of the mines about measures that could be taken to secure improved financial sustainability. Sadly, such constructive engagements did not transpire as strike-related issues dominated the intervening period.

Through the formal Section 189A consultation process, Sibanye-Stillwater and affected stakeholders will together consider measures to avoid and mitigate possible retrenchments of up to 5,780 employees and 800 contractors, and seek alternatives to the potential cessation or downscaling of operations at the affected shafts. We are confident that this process will reposition the SA gold operations for sustainable, profitable safe production.

STRATEGIC REVIEW

Sibanye-Stillwater’s transition from a South African gold producer to a diversified global precious metals producer was well-timed. The announcements of the Aquarius and Rustenburg acquisitions in late 2015 preceded a sustained period of increasing palladium and rhodium prices, which have risen by over 200% and 370% from respective low price points in 2016, more than offsetting the moribund platinum price.

Picture 78

The spot rand 4E PGM basket price of R17,695/4Eoz is approximately 60% higher than it was when the Aquarius and Rustenburg transactions were announced with the spot dollar 2E PGM basket price of US$1,375/2Eoz also approximately 60% higher than it was at the time of the Stillwater acquisition announcement.

 

 

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Through these acquisitions, Sibanye-Stillwater has built a sizeable PGM business producing 1.77Moz of 4E/2E at a favourable point in the PGM price cycle. The approximate R34 billion cost of these acquisitions (when PGM prices were significantly lower) is at the low end of historical acquisition prices in the sector and compares favourably with current market valuations for similar-sized peers in the PGM industry, which have recently significantly rerated. Following completion of the proposed acquisition of Lonmin, it is expected that Sibanye-Stillwater will become the largest producer of mined platinum in the world, the second largest producer of palladium globally after Norilsk Nickel, and joint largest rhodium producer with Impala Platinum Holdings. On a gold equivalent basis, Sibanye-Stillwater remains extremely relevant, ranking third behind the proposed Newmont Mining Corporation/Goldcorp and Barrick Gold Corporation.

On 14 December 2017, we announced an all share offer to acquire 100% of Lonmin. Despite achieving a number of significant milestones during the year, including the approval of the United Kingdom Competition and Markets Authority and the South African Competition Tribunal, subject to specific conditions, an appeal against the Competition Tribunal ruling by AMCU on 19 December 2018 has delayed the completion of the transaction. The Competition Appeal Court of South Africa has set down 2 April 2019 as the date for the hearing of the appeal. As announced on 15 January 2019, Sibanye-Stillwater and Lonmin have agreed to extend the long-stop date for completion of the proposed acquisition to 30 June 2019. Sibanye-Stillwater remains committed to the proposed acquisition – a logical step in further progressing our PGM strategy – which the Board believes will be value-accretive for Sibanye-Stillwater shareholders.

 

 

Picture 30

Picture 29

Picture 28

Picture 27

1 2018 full year production from Sibanye-Stillwater proforma Lonmin (September 2018 annuals) excluding recycling volumes – the inclusion of Lonmin information for 2018 is illustrative only as the Lonmin acquisition has not yet been completed and remains subject to a number of conditions, including Lonmin and Sibanye-Stillwater shareholder approvals and the approval of the High Court of England and Wales

2 Peer group information using public company filings for platinum, palladium and rhodium reflect primary production (where available) for H1 2018 annualised unless full year numbers were available while compiling these rankings

3 Sibanye-Stillwater gold equivalents completed on a 4E PGM basis, and gold equivalent ounces calculated as PGM basket price in the period (R14,729/oz)/average gold price (R552,526/kg) in the period multiplied by PGM production (4E) using the Sibanye-Stillwater 2018 prill split

Palladium and rhodium prices have continued to rise in 2019 to date, underpinned by growing market consensus that the fundamental outlook for palladium and rhodium will remain positive for some years. Palladium is the primary product from our US PGM operations and forms an important component of the PGM basket from our South African PGM mines with rhodium, a critical component of diesel and gasoline autocatalysts, only produced in commercially relevant quantities in southern Africa.

The outlook for platinum is similarly constructive although a meaningful increase in the platinum price is still a couple of years out – by our estimation. Demand remains firm and a lack of capital investment in the South African mining industry, since the global financial crisis, is beginning to impact supply with a number of mine closures announced in the past two years. The rapid increase in palladium and rhodium prices has resulted in palladium trading at a more than US$650/oz premium over platinum, for the first time in more than a decade, which is significantly higher than the US$400/oz to US$500/oz price we expected to incentivise substitution. Indeed there are nascent signs that testing of platinum as a partial substitute for palladium is taking place. Consistent with our long-held outlook for platinum, this implies an improvement in future demand although it is likely to only occur over a period of two or three years.

The outlook for gold is similarly positive albeit more muted than the very solid PGM fundamentals. Global political and economic uncertainty is likely to persist for some years to come, which has historically been supportive of gold demand and the gold price. Despite the recent operational challenges we have experienced, we remain committed to our SA gold operations and to restoring these quality assets to profitability once the AMCU strike has concluded.

 

 

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CHIEF EXECUTIVE OFFICER’S REVIEW continued

The gold assets we inherited – Beatrix, Driefontein and Kloof – have created significant value for stakeholders since the unbundling of Sibanye Gold by Gold Fields. When Sibanye Gold listed, reserves were stated as 13.5Moz with an approximate operating life of eight to 10 years. Since then, our SA gold operations have produced approximately 8.6Moz of gold (approximately 64% of the initial reserves) and enabled us to build a substantial, long-life PGM business while returning over R4.1 billion in dividends to shareholders (at an average 4.9% dividend yield over a five-year period), which is approximately 40% of our market capitalisation on listing. Moreover, after producing 8.6Moz of gold in the past six years, gold reserves of 16.6Moz at the end of 2018 are still 23% higher than they were when Sibanye Gold was constituted.

These quality assets provided a solid base from which we were able to build a large globally diversified precious metals company and will continue to contribute to the Group once the operations have normalised.

NET ASSET VALUE

Sibanye-Stillwater has, through a series of favourably priced acquisitions at a low inflection point in the PGM price cycle, built a sizeable PGM business, which offers significant upside to a higher price environment.

The significant increase in the palladium and rhodium prices since these acquisitions were made, combined with consistent delivery of solid operational results, in our view, will result in significant value being delivered to all stakeholders.

At current market consensus commodity prices and exchange rates, and based on our life of mine (LoM) plans (discounted at an average rate of approximately 7.5% real), we have determined a net asset value (NAV) for the Group of approximately R80 billion. At spot precious metals prices (at 18 February 2019), the NAV increases to approximately R110 billion1. Sibanye-Stillwater is currently trading at a 0.35x price to NAV, which is substantially lower than the average price to NAV of its South African gold and PGM peers.

Our primary focus in 2019 will be to ensure that the inherent value in our NAV flows through into our share price to reduce the price to NAV discount through consistent operational and financial delivery that reflects the benefits of the improved gold and PGM commodity price environments and ensures deleveraging of our balance sheet.

1 Aspects beyond management control, such as volatile commodity prices, cost escalation, production disruptions, and changes to tax and other regulations, among others, could, however, materially impact the Group NAV

Picture 31

POSITIONING FOR A NEW WORLD – SFA (Oxford)

In order to ensure that the Group is suitably positioned for continued delivery of value to stakeholders, Sibanye-Stillwater has agreed to acquire SFA (Oxford), pending certain conditions, which is an established analytical consulting company, a globally recognised authority on PGMs, providing in-depth market intelligence, for several years, on battery materials and precious metals for industrial, automotive and smart city technologies.

The acquisition cost compares favourably with the cost of setting up a similar analytical and research group internally but significantly leapfrogs the time required to build up the intellectual knowledge. While Sibanye-Stillwater will have Board representation consistent with its equity holding, SFA (Oxford) will continue to operate as an independent company, providing services to global clients on metal market analysis. As such SFA (Oxford) is expected to be operating cost neutral to Sibanye-Stillwater. Post completion of the acquisition of SFA (Oxford), Sibanye-Stillwater will retain an 80% equity stake in the company with the balance apportioned to employees as an incentive and retention scheme. In this regard, Stephen Forrest will remain as Chairman of the SFA (Oxford) Board and a non-executive director, Jim Sutcliffe, will be appointed to the SFA (Oxford) Board.

2019 OUTLOOK

The extent and severity of Sibanye-Stillwater’s challenges in 2018 were unprecedented but, while we still face a number of challenges, the manner in which the Sibanye-Stillwater team has responded to and dealt with various crises gives me confidence that we are well-positioned to continue delivering superior value to all of our stakeholders.

Our significant investment in the PGM industry was not made lightly and was against conventional market wisdom. The fruits of this contrarian, but carefully considered, strategy have already delivered tangible benefits, which are not yet reflected in our market valuation. A positive and sustainable fundamental outlook for PGMs is being increasingly accepted, and Sibanye-Stillwater’s commodity mix and geographical diversification offers a unique investment opportunity.

I am confident that the Section 189A consultations with stakeholders regarding the future of certain shafts at our SA gold operations will result in a more stable and profitable business segment, which will contribute positively to Group earnings in future.

 

 

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CHIEF EXECUTIVE OFFICER’S REVIEW continued

Precious metal prices, particularly palladium and rhodium, have surged in 2019 with the recent depreciation of the rand US dollar rate, which is a significant revenue driver, boosting revenues for South African mining companies. The operating environment in South Africa remains challenging although recent political changes and a seemingly more investment-oriented approach by government are positive. While structural changes have yet to be seen, general sentiment about the country’s prospects for economic stability and growth have improved.

I am convinced that Sibanye-Stillwater offers tangible fundamental value and is strategically positioned to benefit from any further upside in precious metals prices.

RECOGNITION

During the past year of disparate challenges, I have been fortunate to have the support of a team fully committed to achieving the Group’s strategic aims and willing at all times to go that extra mile. My thanks to them are unqualified and I am confident that their contributions will continue to be as fulfilling as ever. I am grateful too for the continuing support and wise counsel of the Board.

 

 

Neal Froneman

Chief Executive Officer

29 March 2019

 

 

 

 

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CHIEF FINANCIAL OFFICER’S REPORT

·

Group loss for the year decreased by 43% to R2,521 million

·

Substantial increase in US and SA PGM adjusted EBITDA

·

US$350 million revolving credit facility (RCF) refinanced and upsized to US$600 million on improved terms in April 2018

·

US$500 million streaming transaction completed in July 2018

·

US$395 million bond buy back resulting in US$25 million annual interest saving

·

DRDGOLD transaction completed

2018 will be remembered as one of the more challenging years for Sibanye-Stillwater. The safety incidents at our SA gold operations in the early part of the year as well as the extended strike action at these operations, which started on 21 November 2018, had a significant impact on the financial results of the Group. In stark contrast to this, the PGM operations in southern Africa and the United States maintained steady operating performances with revenues benefitting from higher palladium and rhodium prices in 2018. The well-timed entry into the PGM sector is clearly evident in the financial results, with solid operating and financial performance of our PGM operations compensating for the operational and industrial relations challenges experienced at the SA gold operations.

The Group’s major source of earnings for 2018 was our US PGM operations, which accounted for 50% of Group adjusted EBITDA. The contribution from the SA PGM operations has also increased substantially, due to the improved rand PGM basket price and solid, sustained operational performance. In 2018 the SA PGM operations contributed 34% of Group adjusted EBITDA, up from 18% in 2017. Despite a flat average rand gold price received year-on-year, the impact of the safety incidents and other unanticipated operational disruptions as well as the strike, caused production from the SA gold operations to decrease by 7,034kg (226,157oz), resulting in adjusted EBITDA from the SA gold operations declining by 74% to R1,362 million. The SA gold operations contributed only 16% of Group adjusted EBITDA in 2018, compared with 59% in 2017.

The liquidity requirements of the Group were substantially improved through the refinancing of the three-year US$350 million RCF in April 2018.

The facility was refinanced for three years with two optional one-year extensions and was increased to US$600 million on improved terms. In anticipation of the change in revenue recognition at Rustenburg operation, where we are moving from a purchase of concentrate arrangement to a toll refining agreement, the Group approached its lending group to provide further covenant relief. The net debt to adjusted EBITDA covenant has been extended at 3.5 times till the end of 2019, thereafter it will step down to 2.5 times.

Sibanye-Stillwater completed a gold and palladium stream agreement with Wheaton Precious Metals International Limited (Wheaton International) in July 2018. In terms of the agreement, Sibanye-Stillwater received US$500 million from Wheaton International in exchange for an amount of gold and palladium equal to a percentage of gold and palladium produced from our US PGM operations (comprised of its East Boulder and Stillwater mining operations). The US$500 million arising from the transaction was competitively priced relative to existing Group debt and alternative financing available in international capital markets.

A portion of the advanced proceeds of the streaming transaction of US$500 million was utilised to buy back US$415 million of the high yield and convertible bonds for a nominal consideration of US$395 million. The buyback has resulted in an annual interest saving of US$25 million and a saving of US$137 million over the remaining life of these bonds.

Picture 32

From an operational perspective, the rand gold price received for 2018 was in line with 2017 at R535,929/kg. The impact of the safety incidents and other unanticipated operational disruptions as well as the strike, caused production from the SA gold operations to decrease by 7,034kg (226,157oz).

The average rand basket price received at the SA PGM operations was 10% higher at R13,838/4Eoz in 2018, compared with R12,534/4Eoz in 2017. The SA PGM operations performed strongly with 4E PGM production of 1,175,672oz in 2018, compared with 1,194,348oz in 2017 mainly due to lower surface production. The US dollar average basket price received at the US PGM operations was 9% higher at US$1,007/2Eoz compared with US$927/2Eoz in 2017. 2E PGM production at 592,608 was 57% higher, reflecting the increased contribution from Blitz and the inclusion of a full year compared with eight months in 2017.

Cost performance at the SA PGM operations was again pleasing during 2018. The AISC at the SA PGM operations at R10,417/4Eoz was in line with the cost performance of 2017 at R10,399/4Eoz. The AISC at the US PGM operations increased by 4% for 2018 to S$677/2Eoz mainly due to the frontloading of skills for Blitz, increased royalties due to the improved basket price, higher maintenance cost and planned outages in the metallurgical complex. Unit costs at the SA gold operations were primarily affected by the safety incidents and other unanticipated operational disruptions as well as the strike. The AISC increased from R482,693/kg in 2017 to R557,530/kg.

 

 

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CHIEF FINANCIAL OFFICER’S REPORT continued

For management’s explanation of factors that have affected the Group’s financial condition and results of operations for the historical periods covered by the financial statements, and management’s assessment of factors and trends which are anticipated to have a material effect on the Group’s financial condition and results of operations in future periods, see Annual Financial Report—Overview—Management’s discussion and analysis of the financial statements.

Proposed Lonmin transaction

On 14 December 2017, the Boards of Sibanye-Stillwater and Lonmin announced that they had reached agreement on the terms of a recommended all-share offer pursuant to which Sibanye-Stillwater, and/or a wholly-owned subsidiary of Sibanye-Stillwater, will acquire the entire issued and to be issued ordinary share capital of Lonmin.

The Lonmin group is a major mine-to-market producer of PGMs with core operations in South Africa. It produces PGMs predominantly used in many industrial applications, and in jewellery and investment, with saleable by-products including gold, copper, nickel, chrome and cobalt. The Lonmin group is a major primary producer of PGMs worldwide. Lonmin shares are admitted to listing on the premium listing segment of the official list and to trading on the main market of the London Stock Exchange, and have a secondary listing on the JSE main board. Lonmin also has an American Depositary Receipt programme traded on the over-the-counter market in the US.

The Board believes that the proposed acquisition of Lonmin is compelling and value-accretive for Sibanye-Stillwater shareholders and is a logical step in executing its PGM strategy in southern Africa. By combining Sibanye-Stillwater’s existing, and contiguous, South African PGM assets with Lonmin’s operations, including Lonmin’s processing facilities, Sibanye-Stillwater will be able to unlock operational synergies and complete its strategy to become a fully integrated PGM producer in South Africa. By combining Sibanye-Stillwater’s existing, and contiguous, South African PGM assets with Lonmin’s operations, including Lonmin’s processing facilities, Sibanye-Stillwater will be able to unlock operational synergies estimated at R730 million over the first three years while a further R780 million is expected to be unlocked should the Rustenburg PGM material be treated at the Lonmin facilities after 2021. We are also confident that this transaction will bring greater stability to the Lonmin assets, and ensure a more sustainable and positive future.

To date, several of the conditions precedent have been fulfilled including approvals from the South African Reserve Bank, the UK Competition and Markets Authority, as well as the South African Competition Commission approval received on 21 November 2018, subject to specific conditions.

On 19 December 2018, AMCU filed an appeal with the Competition Appeal Court of South Africa against the South African Competition Commission decision, which will be heard on 2 April 2019. Sibanye-Stillwater and Lonmin have agreed to extend the long-stop date for completion of the proposed acquisition from 28 February 2019 to 30 June 2019.

Additional conditions precedent include, inter alia, the approvals of Lonmin and Sibanye-Stillwater shareholders and the courts of England and Wales.

A circular to Sibanye-Stillwater shareholders and the Lonmin scheme of arrangement document will be posted to the respective shareholders in due course. Included in those documents will be the expected dates of the shareholder meetings and timetable for the closing of the transaction.

FOCUS AREAS – 2019

The continued deleveraging of the organisation will be the primary focus for 2019 through earnings growth, cash flow generation and possible alternative financing solutions which may include pipeline financing. In order to maintain adequate liquidity, the refinancing of the R6.0 billion RCF, maturing in November 2019, will be prioritised. The facility will potentially be increased to provide adequate working capital requirements to the enlarged Group post completion of the Lonmin transaction.

Picture 33

The strong performance of commodity prices, more specifically palladium, rhodium and gold and the weakening of the rand against the US dollar, which started in 2018 and has continued into 2019, should assist with earnings growth and cash flow, which will have a substantial positive impact on the continued deleveraging.

The Group’s main focus on successful closure of the Lonmin transaction will be the integration of the Lonmin assets and on leveraging the initial cost synergies identified during the due diligence. High-level planning of the integration effort and the associated timeline has already started.

 

 

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ACKNOWLEDGEMENT

I continue to be supported by a strong and diligent finance team across the Sibanye-Stillwater group. The Group has been able to mitigate some of the adverse consequences relating to the volatile global environment in which we operate through proactive responses by the financial team. We continue to provide relevant, qualitative information and reporting to all our stakeholders that reflect our objectives and values. I would like to take this opportunity to thank the financial team for their unwavering support and look forward to 2019.

 

 

Charl Keyter

Chief Financial Officer

29 March 2019

 

 

 

 

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MANAGING OUR RISKS AND OPPORTUNITIES

Sibanye-Stillwater views risk and opportunity management as an integral element of our strategy implementation that supports the Group in performing effectively and building confidence in the delivery of predictable outcomes in the dynamic environment in which we operate. A solid understanding and effective management of our risks and opportunities, and ensuring we have appropriate measures in place to mitigate risks and act on opportunities, will give us a competitive advantage. By effectively containing risks and realising opportunities in pursuit of our strategy, we are able to deliver on our strategic objectives and generate sustained value for all stakeholders over time.

Sibanye-Stillwater considers a risk and/or an opportunity to be material if it substantially affects our ability to create and sustain value in the short, medium and long term. The process to identify the material risks and opportunities facing Sibanye-Stillwater is three-pronged and involves taking into account:

·

Our external operating environment

·

Internal factors that may adversely affect business performance

·

Stakeholder attitudes, concerns and expectations (see Stakeholder engagement)

Due consideration and understanding of these factors allows management to identify the most significant and material issues in terms of their potential impact on the Group’s ability to achieve its strategic and business objectives and to create value. Management evaluates the likelihood and potential impact of material issues occurring from multiple perspectives, including strategic, financial and operational viewpoints, prioritising the most material and developing appropriate response plans to mitigate and manage the risks identified.

In this section we report on and discuss first our risks, how these are identified and how we mitigate and manage them. This is followed by a discussion on our approach to opportunities (see —Identifying and managing our material opportunities).

Management of our material risks entails identifying the relevant variables – strategic, external and internal – and understanding how they might impact Sibanye-Stillwater’s ability to deliver on our strategy and achieve our strategic objectives.

Our risk management framework

Risk management is a continuous, proactive, dynamic process, designed to identify, understand, manage and communicate risks that may impact Sibanye-Stillwater’s ability to achieve its strategic business objectives. The Group-wide risk assessment process has been enhanced to ensure that our strategic objectives are included at all levels of risk determination, and to ensure alignment across the Group.

The Group-wide assessment process is cascaded to our major operating segments, which allows for customised identification and management of risks to safe production delivery and cash flow from each operating segment and the contextualising of these risks at a Group level. Many of the risks that are material to the Group are consolidated from an operating segment, commodity or territory specific risks, with strategic opportunities driven mainly as part of the Group strategic plan.

Governance

Governance oversight of risk and opportunity management in 2018 included an annual independent review of Sibanye-Stillwater’s updated enterprise risk management framework, practices and systems, and their effectiveness, by external assurance provider, PwC. The review confirmed that our risk management framework is compliant with King IV, ISO 31000 and the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In line with its duties and responsibilities, the Board of Directors, supported by the Risk Committee, monitored, reviewed, provided feedback on and approved the risk management framework, its components, and the systems and processes making up enterprise risk management.

The diagram below summarises the framework that is in place to identify material risks.

Identifying our material risks

1

Gathering initial input

Operating environment

Analysis of factors over which we have no control that may affect our ability to deliver on strategic objectives

Stakeholder engagement

Analysis of issues raised by stakeholder engagement (see Stakeholder engagement)

Enterprise risk management

Analysis of information from internal business processes

2

Evaluating input

Qualitative

Review of risks based on strategic, financial, non-financial and operational considerations

Quantitative

Review of risks based on implications for reputation, licence to operate
and compliance

3

Reviewing and prioritising

Application of filters for risk determination and allocation of responsibilities to ensure control and further mitigation

4

Determining material risks

Significant material risks are agreed, ranked and appropriate responses determined

 

 

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MANAGING OUR RISKS AND OPPORTUNITIES continued

As part of ongoing monitoring of risk management, the Board deliberated and agreed on acceptable appetite and risk tolerance levels for key performance areas. Our risk appetite refers to the extent of business risk we are willing to take to achieve our strategic objectives and attain certain financial and commercial outcomes. In agreeing our risk appetite, we consider revenue growth, earnings sustainability, environmental impact, employee well-being, health, safety, the environment, human resources, business plan delivery, licence to operate, ethics and governance.

Risk appetite statements

The Group is committed to operating responsibly in its pursuit of creating superior shareholder value. The following strategic risk appetite statements provide directional decision support for strategic decision making in line with this commitment.

Health, safety, sustainability and environment

·

Sibanye-Stillwater will strive for zero harm and to minimise risk by not putting profits ahead of health, safety, sustainability or environment

·

Sibanye-Stillwater strives to exceed industry standards and to avoid entering operating environments where health, safety, sustainability and environment (HSSE) records are not in line with international norms

·

Sibanye-Stillwater seeks to avoid any activity that will compromise our alignment with leading industry health, safety, sustainability and environmental standards

Financial and investment decisions

·

Sibanye-Stillwater will strategically take on additional leverage in order to increase shareholder value only where the operational requirements, through detailed evaluation, are determined to be outweighed by the benefit

·

Sibanye-Stillwater is not willing to accept any risk that has the potential to cause at least a 500-basis point deviation in margin from the plan

·

As part of evaluating investment decisions or capital allocations, the Group applies relevant hurdle rates and discount factors, taking into account items such as level of study undertaken on the project or operation and country risk, among others

Risk escalation

The top 10 risks identified in the risk register are:

·

included in or escalated to the Group strategic risk register

·

evaluated for further mitigation measures to reduce the risk to within the tolerance levels

·

reported to the Board

OUR TOP 10 MATERIAL RISKS

For 2018, we identified and monitored the following top 10 material risks. Given the transformative acquisition of Stillwater concluded in 2017 and the resulting geographic and product diversity, Sibanye-Stillwater’s risk profile has substantially changed. This change is reflected in the change in our material risks and in regional differences. Diversification has reduced the potential impact of certain risks previously considered material. Further detail on each risk, its impact on our strategic objectives, and related mitigation measures, see Top 10 risks: Description, impact and related mitigating actions.

Risk assessments are conducted across the Group at operating unit, business unit, region and Group level with each area continuously monitoring its risk registers. These risk registers are reviewed formally by the Risk Committee twice a year. In 2018, the strategic risk assessments for the Group, and the US and SA operations were independently facilitated by Willis Towers Watson.

The risk methodology applied requires that the risks are inherently rated to provide a view of the risk profile. Controls in place are identified. The risks are then rated to provide a residual rating.

The top 10 strategic risk inherent and residual risk rankings are reflected in the heat maps (below).

 

 

Picture 57

Picture 58

 

 

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MANAGING OUR RISKS AND OPPORTUNITIES continued

Details of the top 10 residual risks identified for 2018 are provided in the table below. Also provided is the risk movement since 2017 and the new risks identified as a result of our geographical and product diversification.

Top 10 material risks and opportunities in 2018

 

 

 

 

Ranking

Risk description in 2018

Comparison with 2017

 

1

Government actions

Incorporates the following risks from 2017:

Further deterioration in South African rating and potential adverse impact on valuations and cost of financing

(4)

2

Socio-political instability and unrest in South Africa

Incorporates the following risks from 2017:

Unrealistic expectations for business to uplift communities in South Africa

(8)

3

Impact of safety incidents, including those contrary to company policy  1

Incorporates the following risks from 2017:

Safety, health and environmental incidents

(7)

4

Mining Charter outcome and Mineral and Petroleum Resources Development Act amendments

Incorporates the following risks from 2017:

Maintaining and obtaining operating licences and other permits in uncertain political and regulatory environments

(6)

5

Under-delivery on operational plans

Incorporates the following risks from 2017:

Under-delivery on operational targets owing to external factors

(9)

6

Significant PGM, gold and other commodity price decreases

New risk

 

7

Global economic downturn or strengthened US economy

New risk

 

8

Financial covenants and net debt

Incorporates the following risk from 2017:

Ability to access, service and repay debt due to external and internal factors that may impact cash flow

(2)

9

Organised labour

Incorporates the following risk from 2017:

Operational disruptions

(25)

10

Change in regulatory requirements

Incorporates the following risk from 2017:

Adverse regulatory changes and socio-political instability

(3)

1 Safety and well-being of our employees is a priority for Sibanye-Stillwater at Group and regional level. As the anomalous spate of fatalities in 2018 is of great concern, a review of the circumstances of each incident was conducted and action was taken to enhance safety practices.

Our Group and regional risk registers include the impact of safety, health and environmental incidents, as well as under-delivery on our plans among the top 10 Group and/or regional risks.

 

 

 

 

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MANAGING OUR RISKS AND OPPORTUNITIES continued

 

 

 

 

 

 

 

 

 

 

Related strategic objective

Risk identification and ranking

Underlying vulnerabilities

Potential consequences and impact on delivery of strategy

Enhancement action plan

Key performance indicators (KPIs)

Inherent risk rating

Residual risk rating

Risk tolerance

Source of risk

  Addressing our South African discount

  Pursuing value-accretive growth

1.   Government actions

For further information, see: Chief Executive Officer’s review, —Chief Financial Officer’s report and

—Performance review—Minimising the environmental impact

  Policy and regulatory uncertainty in South Africa

  Nationalisation movement/discussion

  Inability to comply with social licence and US political climate

 

  Low investor support

  Further policy and regulatory uncertainty

  Increased cost of compliance and doing business

  Loss of international competitiveness

  Lack of investment

  Increased cost/decreased access to capital

  Decreased revenue and SA operations’ sustainability

  Broad stakeholder engagement

  Direct legal challenges to legislation

  Ongoing monitoring of regional compliance

  Participation in organised business lobby groups

  Active involvement in business associations to influence outcomes of regulatory certainty and policy making

  Geographical diversity

  Favourable minerals policy 

  Costs of sustaining social licence

  SA discount on share price

  Optionality to address negative government policy

High

Medium

  Compliance with key laws, legal requirements and social requirements for social and labour plans (SLPs) and Mining Charter targets

EXTERNAL

 

 

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Related strategic objective

Risk identification and ranking

Underlying vulnerabilities

Potential consequences and impact on delivery of strategy

Enhancement action plan

Key performance indicators (KPIs)

Inherent risk rating

Residual risk rating

Risk tolerance

Related strategic objective

  Addressing our South African discount

  Focus on safe production and operational excellence

2.   Socio-political instability and unrest in South Africa

For further information, see: —Chief Executive Officer’s review,

—Chief Financial Officer’s report,  

—Stakeholder engagement,

—Performance review—Delivering value from operations, projects and technology,

—Performance review —Ensuring safe production, and

—Performance review—Occupational health and well-being

  Failure to meet community expectations

  Failure of local economic development projects

  Community uprising

  Historic area of weakness

  Hijacked by political interests

  High unemployment

  SA clash of vested interests

  Dysfunctional local government

  Lack of services (including electricity) and escalating cost of services

  Heightened expectations

  Business and operational disruption

  Safety and security compromised

  Increased costs

  Impact on employee morale

  Unable to deliver on operational plans

  Reduced cash flow

  Mining licence uncertainty

  Reputational impact

  Company required to play government role

  SLP pressure and costs

  Stakeholder engagement

  Investment in local economic development

  Community compacts

  Improved stakeholder relationships (evidenced by reduced community protest action and existence of compact agreements)