Earnings Call Transcript - SBSW Q2 2022

Neal Froneman, CEO

Good morning, everyone, and welcome to our H1 2022 Presentation. We've characterized this period as challenging, which will become clear as we progress through the presentation. Please take note of our Safe Harbor statement regarding forward-looking statements. Let's start with the agenda. I will begin with safety and ESG updates. Following that, I will recap our strategic positioning, especially in light of a complex global environment. We previously introduced our gray elephants at our year-end results in February, and I believe it’s timely to revisit those. I will then hand over to our Chief Regional Officers, Richard Stewart and Charles Carter. Richard will discuss the South African region, Charles will address the US region, and our new Head of Recycling, Grant Stuart, will present on the Recycling segment. Grant will pass it over to our Chief Financial Officer, Charl Keyter, who will go over the financial results. I will wrap things up with a brief conclusion. So, please sit back and relax as we delve into these topics. Health and safety, as well as ESG, are our top priorities. We must focus on our fecal elimination strategy in 2022 following a very challenging 2021. I'm pleased to share that we've made significant progress since the disruptions we faced at the end of last year and into this year. An independent safety expert reviewed our safety strategy and endorsed it as aligned with global industry standards, which is a relief. However, we discovered that the ownership of this strategy is not uniformly established throughout the organization, particularly at lower levels. We have worked hard to foster this ownership, and we have seen positive results. Real risk reduction initiatives are crucial, and we've achieved this with our critical controls and life-saving behaviors, which we consider non-negotiable. We have sustained the improving safety trends that developed towards the end of 2021. However, we regret to report the loss of two colleagues in unusual accidents this year. Thankfully, we have reported zero fatal accidents in 2022, and our injury metrics are trending positively, giving me confidence for a much safer year ahead. Regarding ESG, I want to highlight our Marikana renewal efforts, stemming from the tragic legacy associated with our acquisition of Lonmin. Last week marked the 10th anniversary of that tragedy. In 2020, we initiated a renewal process based on three pillars: Engage and Create, and we've made strides in this area. Initially, there were only 34 recognized widows, but we found there were 44 due to other tragedies surrounding Marikana. Through the Sixteen-Eight Memorial Trust, we have focused on educating their children. This is a long-term journey that requires collaboration with all stakeholders. We assure you that progress will not be slowed by those who do not wish to engage. Key stakeholders, including widows, are collaborating with us on a journey of renewal that requires trust-building and will take time. We’ve established a task team to address legacy issues, including memorial efforts, to ensure that we are being inclusive and catering to the needs of those directly affected. Now, let's discuss our 3-dimensional strategy designed to harness opportunities in this complex environment. Our foundational strategy remains, but we have made minor wording revisions and added "innovation" to our values. Recognized as a force for good, we are building a portfolio of green metals and are involved in energy solutions to combat climate change. We believe that diversity and inclusion, along with responsible technology use, will give us a competitive edge. The world is experiencing significant transformations, including demographic shifts, climate change, and increasing inequality. We must remain aware of these factors as they influence our future leadership and workforce requirements. The COVID-19 pandemic underscored the need for resilience against not just viral outbreaks but also geopolitical events, like the recent invasion of Ukraine. The global landscape is shifting towards multipolarity, and we've prepared ourselves in this regard. In examining the shift from 2021 to 2022, we see significant changes in the economic environment. While 2021 was marked by recovery and stimulus measures post-COVID, 2022’s landscape has seen increased inflation driven by geopolitical tensions, particularly the conflict in Ukraine, which has impacted our supply chains and consumer spending power. This altered environment has positioned us favorably, particularly as we continue to focus on regional supply chains. Our investments, such as the Keliber project in Finland for lithium hydroxide production, underscore our commitment to reducing our carbon footprint while capitalizing on the growing demand for green metals. Despite challenges, such as underperformance in South African PGMs and industrial actions affecting our gold business, we achieved a solid financial performance with a significant profit. Our commitment to dividends remains unchanged, and we calculated an interim dividend at the upper end of our policy. We faced some industrial action but held firm in negotiations, which ultimately led to a three-year settlement. Despite the challenges, we've managed to keep all-in sustaining costs low compared to our peers, which positions us favorably in the current market. Now, I will hand over the floor to Richard Stewart to discuss the South African regions. Thank you.

Richard Stewart, Chief Regional Officer - South Africa

Thank you very much, Neal, and good morning, everyone. In terms of the Southern African region's operating update, the first half of the year was marked by the industrial action we faced at our gold operations that began in March. We resumed production in July. We also initiated remediation at our Beatrix tailings storage facility in December, which meant Beatrix had no production output in the first half of this year. Consequently, production was significantly lower year-on-year, totaling just over 190,000 ounces for the first half. DRDGOLD, which was not affected by the industrial actions, contributed over 91,000 ounces of that output. With production resuming in July, we are looking forward to a major improvement in the second half of the year, and we are forecasting around 350,000 ounces from our operations, excluding DRDGOLD, as we ramp up after the strike period. It's worth discussing the wage negotiations. Industrial action began on March 9 after 10 months of extensive negotiations, many facilitated by the CCMA. When the strike was initiated, we exercised our right to implement a lockout of employees for two reasons: to manage our costs during the industrial action and to ensure safety for employees by limiting violence and intimidation, which was significant during the previous industrial action we experienced in 2018. Thankfully, there was very little violence or intimidation this time around, thanks to our management teams' effective implementation of strike plans and cost management of the gold business, which significantly mitigated financial impact during this period. After two months of the strike, we sought the assistance of the CCMA through a formal Section 150 remediation process. The CCMA, despite considerable political and public pressure, conducted an independent process with integrity, resulting in a three-year wage agreement that reflects an average increase of 6.3% per annum, largely in line with inflation. Additionally, we achieved a wage averaging agreement, which has been a long-standing dispute, providing three years of stability to our operations. We also managed to recover some debt from employees incurred during the strike, which we agreed to partially offset with an ex-gratia payment as part of the settlement. It's essential to note that our actions were consistent with our values and aimed at protecting the long-term sustainability of our operations. This approach is crucial for the entire industry to maintain sustainability and competitiveness in the future. Moving forward, wages and increases must be linked to inflation. If not, it will adversely affect all stakeholders in the long run, including our employees. Another critical aspect is that we must discuss developing a more variable linked wage package that aligns all stakeholders. I hope that this experience fosters learning among all parties for more constructive and sustainable wage negotiations in the future. We evaluate our wages by asking three critical questions. First, are our wages fair? Looking at wages since 2013, when Sibanye Stillwater began, entry-level employees have seen an 84% wage increase while inflation has risen about 46%. This indicates a real wage increase of approximately 40% for entry-level employees, which was necessary for fairness and parity. The second question we ask is whether our increases are linked to inflation, which is vital. If our wages are fair and we maintain the current trend, we will significantly erode our margins since 50% to 60% of our cost base is attributed to salaries. This will impact the sustainability of our operations through different cycles and hinder our global competitiveness. In a current environment with inflationary pressures, paying increases above inflation perpetuates these pressures and results in prolonged inflation, which is not in anyone's interest. Thus, aligning wages with inflation is crucial for our sustainability and competitiveness as a company and an industry. The third question is how wage increases impact the overall sustainability of operations, concerning margins and profitability through mining cycles. This makes introducing a variable wage component crucial, as it aligns all stakeholders, benefiting everyone during up cycles and tightening belts during down cycles to ensure sustainability for future growth. This conversation needs to advance within our operations and across the entire industry. Regarding our PGM operations, the first half of this year showed an 8% reduction compared to the same period last year. Some of this reduction was planned, especially at Kroondal operations where certain shafts are winding down and are due for closure later this year and early next year. Other challenges included technical issues, mining through a significant cost structure at Bathopele, and seismicity at our deeper conventional operations. We also faced industry-wide challenges such as power disruptions, community disruptions, and extensive cable theft. Despite the output reduction, we managed to keep our costs stable. Our total unit costs increased by 7%, which is largely in line with inflation but below mining inflation, which is closer to 12% year-to-date. Combined, this resulted in an EBITDA of just over R21 billion, marking the second-highest EBITDA from these operations despite reduced PGM prices. Our K4 project has also progressed as planned, and we began processing our first tonnes in May, with significant redevelopment efforts ongoing. Our wage negotiations at Rustenburg and Marikana started this month, and we continue engaging with organized labor. Additionally, we made a significant payment of 35% cash flows from Rustenburg to Anglo Platinum per the acquisition agreement, with that last payment due this year and additional cash flows expected from next year. The focus on costs has been commendable; when we acquired Rustenburg and Marikana, they were at the top of the cost curve, but through sustained efforts, they have moved down to the third quartile, with a goal of reaching the second quartile. Kroondal remains at the bottom end of the cost curve, with Mimosa also performing well despite challenging operations. The PGM market outlook has been volatile this year, with various supply and demand factors in play. The Ukraine-Russia conflict has introduced shocks to the system, and while its impact on total Russian supply has been limited, the sanctions have restricted capital equipment availability within Russia, possibly constraining growth and production in the medium term. Recent supply disruptions in our US PGM operations due to flooding have led us to reposition that asset in line with market outlook, impacting annual PGM ounces supply going forward. In South Africa, we face several supply disruptions, including wage negotiations and power constraints. We also anticipate a 10% reduction in secondary supply this year due to fewer cars being scrapped, influenced by inflationary pressures and logistics constraints. On the demand side, light-duty vehicle forecasts have been revised down to about 80 million units, reflecting a decline of nearly 10% from previous expectations due to various factors, including semiconductor shortages, wiring harness constraints, and economic pressures affecting car prices. Jewelry demand in China also remains weak due to difficult macro conditions. Overall, considering the negative impacts on supply and demand, we anticipate a slight deficit in palladium demand and a slight surplus for platinum this year, without considering any potential investment demand for either metal. We expect platinum to move into a slight surplus, while rhodium and palladium will likely balance out as we progress into next year. For our operational guidance for the year, our US PGM operations are targeting 450,000 ounces, with US recycling aimed at about 700,000 ounces due to the reasons discussed. Our PGM operations guidance remains consistent and we are comfortable holding that for the rest of the year. For our gold operations, we forecast around 450,000 ounces, excluding DRD, based on the production ramp-up starting in July. This comes along with a reduced capital guidance of R3.9 billion, allocated mainly towards the Burnstone and Kloof projects. Due to the significant ramp-up, we expect this will negatively impact costs, incurring full costs for most of the third quarter while still increasing production, with overall cost guidance around R1.4 million per kilogram. Thank you, and I will now hand over to Charles for the US region.

Charles Carter, Chief Regional Officer - US

Thank you, Richard, and good morning, everyone. You're likely aware of the impact that the flood event in Montana had on our second-quarter results. For those who missed the detailed presentation on August 11, it's available on the company's website for further context on what I'm about to discuss. The flood affected us at the end of the second week of June, primarily impacting the last two weeks of the quarter. While East Boulder and the met plant were mostly unaffected, the Stillwater mine was closed for seven weeks due to access issues and required repairs to river infrastructure. The impact for the quarter was approximately 15,000 2E ounces, and for the first half of the year, it's estimated to be around 60,000 2E ounces for 2022. In the presentation on August 11, we discussed the revised mine plan in detail. We also addressed significant ongoing challenges, both macroeconomic and specific to Montana operations. We evaluated the mine plan considering possible future price declines and the potential for a recession, recognizing that the market is aware of the current high inflation rates affecting all businesses. Various skill shortages have impacted operations across the U.S., with mining in Montana facing additional challenges like travel distances and a lack of housing near the mine. We are currently experiencing a significant shortage of skilled workers and high turnover rates. Our medium-term plan focuses on recruitment, retention, and training as we integrate a younger workforce. We are also addressing the skills shortage and our reliance on contractors in the short term, which is affecting our cost structure. The plan we presented on August 11 aims to enhance these operations over five years to reach their full potential, particularly improving operational flexibility at Stillwater Mine. This involves advancing primary and secondary development to ensure production readiness at our various mining sites, which currently is delayed by four to six months. Our goal is to extend that to a readiness of 12 to 18 months, aligning more closely with the East Boulder operation. This plan will help us achieve this over the next few years, although we expect higher costs in the interim, along with a focus on improving productivity. The specific ore body challenges at Stillwater, discussed in detail by Wayne Robinson in the August 11 presentation, include navigating through the depression zone and various fault structures that negatively affect recoveries during this mining cycle and consequently impact grades and mining costs. As we progress, we expect to increase ore body flexibility and improve grades and recoveries, which should help enhance our cost structures. We highlighted in that presentation that despite current challenges, our acquisition over the past five years has proven to be a strong investment, resulting in returns that have exceeded the original investment. The current net present value, calculated at reserve pricing of $12.50 per ounce for Palladium and Platinum, indicates a solid return moving forward. I believe that as we refine our mine plan and improve our deliveries, this NPV will increase based on price and other assumptions. This acquisition strategically positioned us well even amidst market difficulties. It is a world-class ore body, providing good options for the future. Although investors and analysts may have expected faster short-term solutions, our three to five-year plan aims to achieve a steady output of 700,000 ounces or more, with a competitive cost structure below $1,000 per ounce, which will give us operational flexibility. With the significant impacts of the flood now resolved, Stillwater is back in production and operating well. We still face some access challenges at the mine site but have temporary solutions in place, particularly for the main access road. The county is collaborating with us to address these issues, and we are in daily discussions to expedite the process. All three of our operations are now performing as they should, and you should start to see this reflected in our upcoming results. Thank you. Now, I’ll turn it over to Grant to discuss the recycling business.

Grant Stuart, Head of Recycling

Thanks, Charles. Yes, let's not forget those 700,000 ounces also not only coming at a good all-in sustaining cost, but also a good carbon footprint as well. But thank you, and good day to all of those listening in. The decline of the Fed recycled ounces by 10% when compared to the first half of 2021 was not only impacted by the flooding incident and reduced underground concentrate but also due to the planned shutdowns and the collapsing scrap steel prices. Scrap steel prices have declined by some 25% in US dollar terms in Europe, China, and the US in the last three months, reducing the incentives to scrap vehicles. Despite the poor outlook, however, we have plans to secure operational sustainability by one, securing and growing our customer base received rates through proactive engagement strategic partnerships and smart contract management; and two, real margin accretion and increasing inventory turnover. The drop in adjusted EBITDA for the second half of 2021 from $50 million to $39 million in the first half of this year, despite similar feed rates is largely due to price. In the second half of 2022, we sold a similar number of ounces at a quarter of the price per arm realized in the second half of 2021. We also sit with a higher working capital balance of some $511 million at the end of June, largely due to a higher basket price with rhodium, the front runner. We are expecting a reduction in inventory and working capital when these ounces turn out in the coming months, especially with rhodium, which takes slightly longer. We should also see a lower balance following the lower quantities we are currently receiving. Our recycled business is largely self-funded from internally generated cash flows, and so advances are funded from current cash holdings. The advances were secured in assay inventory on site, with predetermined settlement rates for the advances. Consequently, these funds are largely risk by an attractive very favorable interest yield. Interest income from prepayments through the half was $10 million. One of the key market advantages in our existing – is our existing expertise in the recycling of PGMs and our longevity in the space. Our feeder network extends across the globe despite our North American connector bias. Our skill in smelting – in the smelting space, particularly when it comes to smelting and carbon ridge catalysts is also a competitive advantage. We are progressing studies and test work to expand our recycling operations in Europe. In addition, we plan to leverage our established relationships to enter new markets and close the loop on battery metal recycling and the hydrogen economy. The growth strategy supports our green metal focus. Our recycled ounces coming in at less than 0.2 tonnes of carbon dioxide equivalent per ounce, some six and a half times less than the primary mount ounce, we stand to attract a real and marketable green premium. With that, I'll leave it there and hand over to Charl. Thanks.

Charl Keyter, CFO

Thank you, Grant, and good morning to all participants. We continue our disciplined capital allocation. Work on the Burnstone project and the K4 project is progressing well, with K4 hosting its first ore during half one 2022. The estimated capital expenditure on these two projects for 2022 is in line with plan at R2.1 billion. Our cash reserves at R27 billion exceeded our target of R20 billion and supports our flexibility and optionality. If we turn to stakeholder shared value, we have declared an interim dividend of R1.38 per share or R3.9 billion, which remains at the top end of our dividend policy. In terms of the 1.5% of equivalent dividend value for social upliftment projects, we are in the process of setting up the mechanism and the governance structures to manage these funds. We maintained our net cash at EBITDA at 0.16 times, and we remain in a robust financial position. Three projects have been funded from the BioniCCubE. They are the investments in Verkor of €25 million, EnHywhere of €5 million, and Glint of $6 million. The ongoing disciplined capital allocation has resulted in a strengthened balance sheet, which was achieved through a combination of debt reduction and cash generation. This slide illustrates the evolution of our debt compared to EBITDA, which peaked at a high of 2.6 times in half one 2018 and flipped over to a net cash position from half to 2020; a position we have maintained for two years, despite significant returns to shareholders. The graph on the right highlights the dividends paid to shareholders, since the resumption of dividends in half two 2019. If we include the half one 2022 interim dividend that the Board has approved, this number is over R29 billion or approximately three times our market capitalization at listing in 2013. Despite the operational challenges highlighted, we still managed to produce a solid set of results. If we start with the revenue, revenue is down 22% to R70 billion compared to the same period in 2021. The main impact was the three-month industrial action at our SA gold operations, but also lower commodity prices across all our operations. Good cost control and cost containment during the industrial action has resulted in cost of sales being down 2% period-on-period. Amortization and depreciation was down R500 million, and this was in line with the lower production at both our SA gold and SA PGM operations. Profit before royalties on tax was just under R19 billion. Royalties and taxes for the period were R6.6 billion compared to the R10.7 billion in half one 2021. Royalties and taxes were both lower due to lower overall profitability for the period. Profit for the period was R12.3 billion, the third highest profit for a half year since inception and normalized earnings was R11.2 billion. This translated into earnings per share of R0.0426 per share. Thank you, ladies and gentlemen. I will now hand you back to Neal to take us through the conclusion. Thank you, Neal.

Neal Froneman, CEO

Right. Thank you, Charl. I really only have one slide left to conclude. So let's have a look at that. The challenging H1 period is behind us. I've explained why it was challenging. What we expect in the second half of the year is that both the South African gold and the US PGM production will normalize, certainly by the fourth quarter. The South African PGM business will continue moving down the cost curve and generating strong cash flow. Certainly, getting back to the right volumes will help that. So the operational outlook for the second half of 2022 is significantly better and we're well positioned for that. In terms of other positioning, our regionalized management structures are in place; they were a refinement of our previous structure and necessary to ensure that we have capacity for growth and of course, they will focus on the strategic essentials during this period. Our strong balance sheet provides resilience against an anticipated macroeconomic downturn. We have maintained discipline when it comes to capital allocation, as you've seen with the dividend declaration. What we haven't spoken about a lot today is we've been very deliberate and very patient regarding our approach to M&A. You've probably heard me say a few times, in the public domain that we don't see value yet in areas that we're interested in. We will sit on our hands until we can find value opportunities. We're well prepared for this very complex global backdrop and future scenarios, the global geopolitical and macro environment is very volatile and uncertain, but I think you should have confidence in our assessment of these issues based on the eight gray elephants that we discussed at the beginning of the presentation. Our PGM business is very well placed for an extended internal combustion engine cycle. We've never been proponents of the demise of the internal combustion engine in the short term. Of course, even if we're wrong in terms of the internal combustion engine, you've got very significant demand underpinning built up from the hydrogen economy. So we remain confident in the long-term demand for PGMs. In terms of the supply of critical metals into those chosen regional supply chains, which includes PGMs, by the way, but our battery metals positioning into really high-quality projects, into high-quality countries is actually turning out to position us well. I can see very significant revenue generation in the not-too-distant future from these investments. On a macro scale, again, our diversification, both from a commodity and a geographical point of view has addressed risk and ensures a balance in our portfolio. So with that, I would hand over to James, and we would be very happy to take your questions. Thank you, James.

James Wellsted, Investor Relations

Thanks, Neal. I'll start with several questions about the PGM wage negotiations. When do we expect to conclude the South Africa PGM wage negotiations? Are we targeting a five or three-year term for ongoing PGM wage talks? What is the current status of the wage negotiations? Are we close to reaching a deal? Additionally, what is the risk related to wage negotiations for South African supply, especially given that the other two major miners who negotiated this year have already settled on a five-year period?

Neal Froneman, CEO

Thanks, James. I think Richard is best placed to answer all those questions regarding wage negotiations. Let me hand over to Richard.

Richard Stewart, Chief Regional Officer - South Africa

Thanks very much, Neal, and good morning, again, ladies and gentlemen. So, in terms of the wage negotiations, we formally commenced our negotiations or engagements towards the end of July and into early August. Over the period of Marikana, we did step down those engagements for a couple of weeks during the commemoration. So that's where we are in terms of the process. When would we like to conclude? I think we've publicly heard from AMCU that they would like to conclude these negotiations in four meetings. That is certainly something we would agree with and think is possible. From our perspective, we would certainly like to see these concluded by the end of the third quarter. In terms of the three versus five years, I think there are several aspects that we need to consider there. Obviously, the longer wage negotiation agreement provides an element of stability. Of course, it's very important again to recognize that you cannot pay a premium just for a longer agreement. We recognize we are in a very volatile inflationary environment. To be fair to all stakeholders, that needs to be flexible to cater for inflationary environments in the future. How that impacts on our operations year-to-date is lower than before.

Neal Froneman, CEO

And Richard, it's probably safe to say that we know our employees would really like to see a five-year wage agreement and we hope the unions will take note of what their members also want. Thanks, James.

James Wellsted, Investor Relations

Thank you. The next question is linked to the costs, all-in sustaining costs have only risen by 7%, while mining year-to-date is at 12%. How did management achieve this; what were the levers specifics, please, if you can share? Was it labor reductions, procurement, etc. that were pulled? And how much more can these levers be pulled going into 2023? Given your small increases in all-in sustaining costs versus peers at your PGM business, do you believe that you're putting adequate sustaining CapEx into the business to ensure the future sustainability of your operations?

Neal Froneman, CEO

Yes, those are all good questions. We certainly understand our cost structure. At a high level, we don't underestimate the importance of capital for our business. Rich, could you elaborate on the details?

Richard Stewart, Chief Regional Officer - South Africa

Thanks, Neal. Let me start with the last part of that question. First, yes, we are very comfortable with the sustaining capital that is going into operations, including sustaining equipment and fleets as well as development to maintain ore bodies. Regarding all-in sustaining cost, several factors contribute to it. On the absolute cost side, we have seen increases above inflation in specific items such as steel, fuel, lubricants, and certain chemicals. We have implemented a proactive strategy for our supply chains to limit those increases where possible. Operational efficiencies have also played a role. Our total unit costs have increased by 7%, which aligns closely with inflation but is significantly below mining inflation for the year-to-date. We are closely examining our overhead costs. Restoring our production to desired levels will likely be the most important factor for managing costs moving forward.

James Wellsted, Investor Relations

Thanks, Richard. The next set of questions is linked to CapEx and projects. I'll ask them all together. Real stated gold CapEx guidance of R3.9 billion is lower than the R5.2 billion guided previously. How much of this difference do you expect to carry over into 2023? What impact has the industrial action at the gold, SA gold division had on development at Burnstone? Is it still on time and on budget? On K4 and Klipfontein at the PGM operations, can we give color on the contribution of the Klipfontein project on production, as well as the progress on the K4 project?

Neal Froneman, CEO

Thanks, James. I think Richard, you could handle the bulk of that, but perhaps you might want to loop in Rob.

Richard Stewart, Chief Regional Officer - South Africa

Perfect. Thanks, Neal. Let me start off with the question on the carryover of CapEx and gold. I indicated that one of the key aspects to managing our cost during the industrial action was being able to put a hold on all of our costs, including significant overheads. Capital, including all production capital essentially gets shifted out. Is there a carryover? Yes, but it is not like there's a significant hump that comes.

Robert Niekerk, Project Director

With respect to Burnstone, it has been impacted by the strike of the gold operations and it has also been impacted by the slower than planned buildup of labor at the Burnstone project. This is largely due to us trying to recruit predominantly from local areas. I would like to add that once we are a full complement, we will not fall behind. We are tracking the schedule very closely in terms of both development, infrastructure, as well as capital spend. So let me leave it here. Thank you very much.

James Wellsted, Investor Relations

Thanks, Rob. I'll give Richard a bit of a break now. I'll ask Charles some questions. How do you expect working capital movements to evolve during the second half of the year? Just a little bit of color on what happened with the restructuring costs of R36 million in the current year. Is it a line item we can expect to see going forward? Also, given your outlook for operations and PGM prices, why did the company mention that after due consideration of future requirements, the dividend may be increased beyond these levels, i.e. the 25% to 35% range?

Neal Froneman, CEO

Sure. Thank you, James. If we started the working capital, I cannot give you a definitive answer. But what I can say is that obviously, working capital is impacted by one, the recycling volumes and the recycling prices that we receive, and as these go up and down, working capital response correspondingly. Assuming that volumes stay constant and we've seen a slight downturn in prices, you would expect some release over the balance of the year.

Richard Stewart, Chief Regional Officer - South Africa

The restructuring costs are predominantly voluntary separation costs paid at the time employees leave the employee of the company. Over our history, this is a line item, and we can expect that to be there going forward. In terms of your question on dividends, we've always said in terms of the capital allocation framework, if we satisfy all of our priorities, we will return back to shareholders. That comment relates to dividends and there’s no indication that we will increase the payout. But once we've satisfied all of those priorities and have excess cash, we have the ability to increase beyond that level.

James Wellsted, Investor Relations

Thanks, Richard. A couple of questions on M&A. Can we please provide an update on the Rhyolite Ridge lithium boron project? Is it still on track for the H2 2024 production schedule? The second question is about the case regarding the Brazilian transaction, the Appian transaction. When can we expect a resolution? Does that process imply that you will not engage in M&A until that is settled? Finally, what is the expected size of the attributable investment over three years to develop electrolyzer catalysts alongside arrays?

Neal Froneman, CEO

Thanks, James. In terms of Appian, we are in the middle of a legal process. We have responded to their claim and filed our papers. I expect it's still a long process. Absolutely, it does not stop us from doing any other M&A. The issue around M&A is that it's all about value. Maintaining a strong balance sheet puts us in a position where we can be quite opportunistic. Let me stop there and ask both Charles and Rob to comment on Rhyolite Ridge. Charles, you go ahead first.

Charles Carter, Chief Regional Officer - US

Thanks, Neal. It's a very interesting project that we are partnering on. I was really impressed with what I saw. They do have an ambitious set of objectives. I think it remains to be seen exactly how those timelines evolve. They have been very innovative in how they are seeking to tap US federal funds and engagement around that. I think they are well ahead of the curve in relation to other mining companies on that ambition. It remains to be seen how that evolves; none of that is easy or quick. So I am impressed with the approach.

Robert Niekerk, Project Director

I was very comfortable with what I saw in Nevada. The Ioneer team has submitted a revised plan of operations for the Rhyolite Ridge project, which does not impact the team's back operation. The Bureau of Land Management has requested additional information, as is customary, and Ioneer is working on providing that. They are now in the final stages of the permitting process for that operation and are optimistic about a positive outcome in the next 18 months or so.

James Wellsted, Investor Relations

Thanks, Rob. Neal, we have two more questions from the webcast. Before I ask them, I want to highlight that we held some Investor Days last year, where we presented 10-year profiles for all operations, including capital expenditures. This information is available on our website. Regarding cash flow from the Rustenburg operations, it should be a similar amount if prices remain stable; once those payments are completed, our cash flow will enhance significantly. Keep in mind that normalized earnings will increase, so the portion allocated to dividends will rise accordingly.

Neal Froneman, CEO

Let’s start with the zama-zamas question. We have highlighted this issue for years. We've incurred a considerable amount of money dealing with this problem. It's unfortunate that it only gets recognized when there are tragic incidents associated with it. The fact that illegal mining is now visible is a good outcome. We should declare a state of emergency, involving the military, and we should engage with police for special assistance with us. It is a complex issue and will not be solved by merely dealing with these miners. We will continue to engage with the international organizations. It's a poverty issue; we must address the syndicates.

James Wellsted, Investor Relations

Thank you, Neal. I think that's the end of the questions. I'd like to thank everyone for joining us for this presentation. If you have any further questions, please send us an email or give us a call, and we will be happy to respond as soon as we can. Thank you very much.