Sunday, January 16

Sibanye bets strongly on increased demand for lithium


FIFI PETERS: Sibanye Stillwater is a mining company that is investing heavily in the battery materials business. His latest deal is valued at around $ 419 million, which is around R8 billion. It was in a joint venture at a lithium mine in Nevada in the US The deal is still subject to approvals.

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To hear why the company is investing so much in battery materials, meet Sibanye Stillwater CEO Neal Froneman. Neal, thank you very much for your time. He has clearly marked it as an important space sector for the future of Sibanye. Help us understand exactly why you think now is the best time to act.

FRONEMAN NEAL: Certainly, and greetings to all. We entered the PGM business after doing very detailed research on the future of PGMs, and we still strongly believe in PGMs.

But once we came to understand the PGM business, we also came to understand that battery electric vehicles were going to make significant advances in the mobility market. Based on that, once we complete our PGM strategy, we acquired SFA to launch our metal battery strategy. SFA is a research organization that helps us develop our views on metals and battery chemistry.

Lithium has become one of the most important metals that is required and thus you have seen us take two steps to buy lithium assets, one in Finland and then of course the one you are talking about now in Nevada at The USA. .

FIFI PETERS: But aren’t you investing at a fairly high point in the cycle here, where we’ve seen the price of many minerals soaring through the roof? I wonder if you are not paying much more for these mining companies as a result of when you are choosing to invest.

FRONEMAN NEAL: I do not believe it. I think certainly the prices of all raw materials have gone up, but the real demand for battery metals is only beginning. I think you can see a doubling or even a tripling in the price of lithium over the next four or five years, which is why we are entering now. Of course, it is the flavor of the month and there is a lot of competition and there are people who will overpay, make mistakes and buy the wrong projects.

We have been very disciplined. We have rejected many and we are very selective as to which markets we want to supply. The United States is one that we are particularly interested in because there is also a shortage of lithium projects in that region.

FIFI PETERS: And, I imagine, an abundance of potential. Could you tell us about what you are potentially seeing on the ground in the US and what it means for Sibanye Stillwater going forward?

FRONEMAN NEAL: As you know, we have a very large operating base in the United States at the moment. The best way I can describe it is that we are the largest taxpayer in Montana based on our PGM business there. So that gives you an idea of ​​the scale, or maybe it gives you an idea of ​​the inefficiency because we pay too much tax; but we have good accountants. So that’s not the reason.

FIFI PETERS: Well, you are making a lot of money and you have honest accountants, and that is why. (Laughing)

FRONEMAN NEAL: Absolutely. But the United States is a very large market, with more than 300 million people; And it is a market that, under President Biden’s guidance, is going to transition to a much greener country, and we can see that the Americans are very sincere in doing so. Finding lithium in North America for North America is key, because Covid has shown that supply chains have been severely disrupted as the global economy and countries want to become more dependent on their own resources, and we all benefit. those aspects that come together.

So a wonderful market. This is a great lithium project. It will be in the lowest quartile, if not the lowest cost producer, because it has a boric acid byproduct. It is long lasting, 26 years, so it has scale. And it’s shallow and very close to some of the biggest battery manufacturers in the world. It is an ideal situation, very well positioned.

FIFI PETERS: I was talking to James (Wellsted), his spokesman. I remember when he made his first acquisition in the battery material space, I asked him if he had called in Elon Musk, who we know is doing quite a bit of work in the EV space. He said no at the time and I wonder if that has changed now with this new acquisition, Neal.

FRONEMAN NEAL: No, we haven’t called him yet. I think when we have a product, if they haven’t called us by then, we will definitely call them. That is a very logical goal, but there is a lot of water that still has to flow under the bridge.

FIFI PETERS: Tell us about that, because I imagine you are specifically referring to the approvals that this deal has yet to pass.

FRONEMAN NEAL: Yes, exactly. Four permits are required. Two permits have been issued. Obviously, everything related to mining, especially in North America, is environmentally very sensitive. We trust that we will obtain the last two permits but, to safeguard ourselves, we will make the payment only once we have those two permits. That’s a bit of risk management. But we will certainly work with our partners and, of course, with concerned environmentalists.

I think we have a very good track record of working with what we call our good neighbors in Montana, and I will be eager to connect with those concerned about mining activity in this area, where there is a species of grass called buckwheat that needs to be protected. , and our partners have done a lot of work on it.

But surely, if you can sit at the table and talk, you will solve the problems. When you start pursuing litigation, these things drag on forever. I certainly don’t think that’s the case.

FIFI PETERS: You have paid a principal dividend and bought back your shares, but you are also betting a lot in this space and you could say that the margin of error is quite small. What are the main risks here, in your opinion?

FRONEMAN NEAL: We are not taking all our money and gambling the farm. We have shown that we have a very good track record in creating value. We have paid for the construction of our PGM business in P …? … 7:14 Ebitda only. This is a significant value creation, probably much more than dividends will ever create.

However, dividends are important. We have made a buyback and we are a more diverse company than most other producers. We are disciplined and will create value with a combination of dividends, buybacks and value-added growth in the green metals space.

FIFI PETERS: Speaking of litigation, today (September 22, 2021) news emerged from the South African mining sector, saying that the court had voted in favor of the industry, essentially upholding the ‘once empowered, always empowered’ clause when it comes to the mining charter and economic empowerment black. In your opinion, is this a victory for the industry and do you think it will encourage more investment in the South African mining sector?

FRONEMAN NEAL: It is definitely a victory and it has two aspects. The first is that you can’t change the rules by looking back. If the government wants to introduce new rules, it must do so looking to the future. That is first.

The second thing is that the letter was always politics. It was a guidance document, it was not a law, and in good faith the mining industry adopted it and did what it did. This is a real windfall for business. It shows you that the legal system works and that will inspire a lot of confidence in investors.

However, if the minister decides to appeal this, it will prolong the process and create more uncertainty, resulting in a lack of investment. So I hope, as difficult as it is, that you recognize this as the second time that we have a pro-business ruling that we can move forward and create a much more stable and growing environment, and then really tackle poverty and inequality. , which is what economic growth will do.

FIFI PETERS: Of course. There he introduced an element to the argument that the government can appeal this, and I suppose we’ll have to see how they respond.

But in the meantime, remind us when you finally call Elon Must or when he finally calls you, and maybe you’ll give us the exclusive; you are more than welcome. In that regard, Neal, thank you so much for joining the show.


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