Sibanye Stillwater Limited (SBSW) Q4 2020 Earnings Call Transcript

Sibanye Stillwater Limited (SBSW -1.85%)
Q4 2020 Earnings Call
Feb 18, 2021, 3:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Neal Froneman

Good morning, and welcome to our 2020 year-end results presentation. It is a long presentation as we have much to share with you, a lot of good news. I trust you will find the contents enlightening. Let me say, please sit back and enjoy.

I'm just going to share my screen with you. As I said, this is our 2020 year-end results, obviously, incorporating some focus on the second half of the year. There's also a substantial strategic update that will be included. As always, please take note of our safe harbor statement.

In terms of the content of the presentation that really followed through the following key strategic highlights, I think you will find in the ESG section a good demonstration of ESG excellence and some exposure to what we see coming from the hydrogen economy. And certainly, we believe that the products we produce are making a difference, one PGM ounce at time, and we will also demonstrate very significant social and economic and environmental impact. And of course, good exposure to the future hydrogen economy. It's important to share with you our journey on improving and developing a value-based culture.

I'm going to share some detail, the organizational structure transition, which includes concepts such as Holacracy, stratified systems theory, and talk of global competence. In terms of operational delivery, you will see, probably from the announcements already this morning, that we had stellar operational delivery despite the challenges around COVID-19 disruptions. Certainly, I think we've proven our ability to rapidly respond to these challenges. The good underlying operational performance has resulted in record financial performance, and Charl, our CFO will take you through that at the appropriate time.

Very pleased to say that we have declared a dividend at the top end of our dividend policy. And again, Charl will show you the underlying finances and, of course, the dividend. And then, of course, you would have also seen we recently reserved -- apologies. We released a reserve and resource update.

And the board has approved an investment in some South African projects, and I'm going to be very pleased to share that with you as well. We've been talking about our technical strategy for the last few years, and I'm very pleased to say that's well advanced. And we will be giving you some indication of our future strategy around external growth as well. Very importantly and, again, Charl will cover this in some detail, we've had a lot of questions around capital allocation.

I have promised shareholders that once we've had board approval, we will share with you a detailed structure on how we intend to allocate the very substantial amounts of cash that we are generating. So that's essentially also the structure of the present. We like to operate strategically, and the diagram that you just saw pop up on the screen indicates our strategic focus areas. I would also point out that the color coding is represented in the first slide as well.

Those areas are linked to these strategic focus areas. So the first one and core to our business is really ESG, and we talk about embedding ESG excellence in the way we do business. And let's have a look at that as it relates to 2020 and looking forward. So we all know that 2020 was a challenging year in terms of COVID-19.

We've developed a strategy that really is about living and working with COVID-19. We believe COVID-19 is something that is here for the long term. And, in fact, there's been some unique opportunities to improve our operational efficiency as a result of COVID-19. And I think the first point is that the protocols that we developed have been implemented and implemented very successfully at all our operations, and you will see from one of the following bullet points that the South African mining industry, COVID-19 death rate is one-third of the national rate.

That really underpins how successful these protocols were. In addition, we have identified employees that were most vulnerable, those that have very significant COVID comorbidities, I should say. And we actually developed ways to reduce that risk and ensure that their lives were protected. Montana was hit by what we call the first wave in the fourth quarter of 2020.

You can see it in the graph below, a very substantial first wave late in the year, which obviously impacted on the operations in the fourth quarter. Just moving on. And some of these numbers we've quoted previously, so I'm not really going to focus on the left-hand side of this slide. But we believe we're making a real difference for stakeholders in our business.

There's been significant COVID-19 support to our stakeholders, and that continues. We have publicly expressed that we are willing to contribute ZAR 200 million toward the rollout of vaccines, obviously, under specific conditions. Those are outlined in the release of this morning. We have very substantial capacity to assist with the vaccine distribution as well.

We have 44 health sites, where we can administer vaccine. That translates into about 18,000 people per day that can be vaccinated. We would like to extend the vaccination to the dependents of our employees and, of course, our doorstep community, and we're willing to fund that. And we've made that quite public and, hopefully, the government will support us in that.

We've made significant impact through social investments. This morning, we announced ZAR 6.8 billion of capital investment in new growth projects. That was approved. Our social and labor plans and corporate social initiatives and other ESG initiatives are being funded at the moment.

And of course, we're providing substantial supplier and SMME support. In terms of tax, we all know that SARS tax receipts for 2020 was ZAR 300 billion versus ZAR 200 billion budget before. And that additional ZAR 100 billion essentially paid for the mining industry. In terms of our sales, royalties and taxes of ZAR 7.1 billion were paid in 2020 versus ZAR 2.3 billion in 2019.

That's a 213% increase. So these are very, very substantial contributions to the national interest and to our stakeholders. As I say, we are making a difference. Another area of focus and an area where we get lots of questions from our shareholders is around Marikana, the renewal and the restitution following the disaster made.

We believe we are creating a new and much better future. First of all, that starts with the operations, Marikana operations themselves. We've restored economic viability and, essentially, in the long-term future is also being secured through the approval of the K4 project. We believe this is an opportunity to build a new legacy together with stakeholders.

We started that process last year with the Marikana Disaster Memorial. And essentially, we are fostering healing and closure by doing the following things. We're providing ongoing counseling to those that were affected initially, emotional support for the affected employees, the widows and their families. We have delivered seven houses, two with us.

The balance of nine houses will be completed and handed over in 2021, which means all widows of those diseased mine workers and security guards would have received houses. Pursuing justice and restitution for those affected, we believe there will now not be closure until there is proper justice and restitution. And we have stepped up and are trying to resolve these issues on behalf of those people that deserve to see justice done and to receive restitution. There's ongoing educational support for the 141 beneficiaries from the 1608 Trust that was established by Lonmin.

And we're honoring Lonmin's outstanding legacy SLP obligations while we are delivering on our new SLP3 commitment. So we really have stepped up to address these legacy issues and to change the direction and trajectory of what's happening. The structure below is really the strategy, and you can see how the renewal program is focused on the widows, just the small local tribe, the [Inaudible], the social restoration and, of course, the Koppie project, which is really about a memorial that we would like to establish there. That should address the legacy issues.

Of course, future and ongoings, the sustainability is being addressed through economic restoration. As I said, we've now stabilized these operations, the economic viability of being restored. We're looking at other projects within the areas such as agriculture, industrialization and enterprise development. Of course, we can't do this on our own.

And we do need to collaborate with all the stakeholders in the area, but this is progressing and moving forward quite nicely. In terms of the products we produce, we are a leading producer and recycler of green metals. I'll focus first on the production of PGMs. And you can see the key ones listed at the top of the slide, platinum, palladium, rhodium, Iridium and ruthenium.

As I alluded to right at the beginning, we do see the hydrogen economy developing very quickly. We have substantial exposure to that, as I'm going to outline below. But for now, the PGM play a very important part in removing noxious exhaust gases and hydrocarbons from automobile exhaust. The future technologies that we hope to be involved with is in green hydrogen.

PGM-based approach on the exchange membrane technology, which we believe is well suited to using intermittent renewable energy feed. And then, of course, hydrogen fuel cells, which we know are efficient and environmentally friendly and will become the alternative source of power for many things there, but primarily automobiles. The metals that are involved in these future technologies are clearly platinum, Iridium and ruthenium. And we're the largest producer, independent producer, of these particular metals.

So we're very well-positioned to benefit from the future hydrogen economy, and I'll say a bit more later on in the presentation about that. Our Columbus recycling business in the US is also a very proud business segment. It's one of the largest global recyclers of spent auto catalysts in the world. We recycled 840,000 3E ounces, that's palladium, platinum and rhodium, and that was in 2020.

Very important to note that not only is recycling smart in its own way. But from an environmental point of view, our recycling facility emits six times less tons of carbon per PGM. It uses 63 times less water, and it generates 90 times less rock waste than the mining operations. So these are very, very smart and environmentally friendly processes.

In addition, from a commercial point of view, the PGM recycling business has green credentials, which provides access to lower yield funding and tax-exempt bonds. And certainly, we see that as part of the capital structure for our recycling business. So very important part of our business when you consider the ESG credentials related to that. I'm also very pleased to announce that we've done the necessary work to determine when we can achieve carbon neutrality as a group.

And we will be targeting -- committing to targeting carbon neutrality by 2040. Internally, we hope to meet that target substantially, but that requires further work. And in support -- this is all in support of the Paris Agreement and the United Nations Sustainable Development Goals. In terms of our specific goals at a high level, our goal is underpinned by the following: Advocating for future decarbonization of electric power in South Africa through our role in the Energy-intensive user group through business Unity South Africa; the Electricity Policy Forum; and, of course, other sectorial forums.

Decarbonization targets, that will be built into the long-term incentive framework for senior management. So we are being serious about making sure that we incentivize to achieve these targets. We are also looking at continuous energy efficiency improvements. We're targeting a 2 to 3% year-on-year improvements as a minimum.

And just for reference, through these initiatives, 165,000 tonnes of CO2 emissions were avoided in 2020. We are increasing renewables in our energy mix, 50 megawatts solar PV plant is in development. We're looking at a 200-megawatt plant of additional solar PV renewable energy projects. We're looking at storage and wind projects as well.

And we're hoping and targeting 20% renewable penetration by 2030. As you can see from the bottom of the slide, a full update on our decarbonization strategy will be provided in the latter part of 2021. But we are happy to make the commitment of targeting carbon neutrality by 2014. I'm not going to go through these.

These are really recognitions from credible organizations and institutions that have recognized our ESG credentials. And we look forward to adding to this list and even enhancing the ratings that we received from these organizations. I'd like to now move on to the value-based culture that we are building and enhancing within our company and the initiatives around that. I think, first of all, let's talk about gender equality.

I am specifically championing the Women in Mining Initiative at the Minerals Council. And I volunteered for that role because I believe in this initiative. At Sibanye-Stillwater specifically, we're targeting 30% of females in the workforce by 2025, and of course, increased representation and development of women at all levels. We are progressing with intent.

These are not just motherhood and apple pie statements. For instance, 30% of our South African female versus -- were female, sorry, I should say -- were female in 2020. 30% of our promotions approved in 2020 were women, 31% of new recruits in 2020 in the US to create the first corporate membership and establish the Woman in Mining chapter for the US PGM operation. So that's also well advanced in the United States.

In terms of COVID and our ability, as I mentioned earlier to you, some of the opportunities that COVID created, we've been able to accelerate our cultural growth and implement some unique working practices within the company. We've introduced what we call the SoHo concept. That's a small office, home office. What we have really used as remote working, where possible, a, to reduce the risk of exposure to COVID.

But in addition, there are health and safety and productivity benefits. We've seen it in our results. We've seen it in the activity of our employees. There are lifestyle benefits.

It's a privilege. And I'm pleased to say that no ones abused that. It's also been -- we've also been able to access the global labor pool. And becoming a global organization, that's a very important part of ensuring that we have the right competence and the right capacity within the company.

And in fact, that we are able to grow globally. Internally, we've been able to expand inclusivity through virtual connect sessions. We're able to reach wider audiences. We are able to get more involvement from those people attending these sessions.

And this was very effectively used in the lockdown period, a, to maintain connection with our employees. But we actually accelerated some very smart working practices through some of these initiatives. Virtual training and development are accessible and efficient. We use that.

We use the Henley School of Management. And we even have graduates coming out of these virtual sessions. Probably more importantly, though, is we've been able to enhance engagement with our employees and the organization and achieve alignment across the group. In other words, across the oceans.

We have far more engagements across continents using virtual methods of work. So I do believe this is yet to stay. I do believe this has created a lot of engagement and will become organization's competitive edges. As I mentioned in the beginning, for probably the last year, we've been implementing a new leadership architecture, which is being -- has been designed to obviously enhance the current performance of the company but also to ensure that we are future-ready for the strategy and growth that we see unfolding in the not-too-distant future.

So the strategic leadership has really been configured in line with stratified systems series. We've embraced Holacracy. That's provided autonomy, agility and purpose alignment. We've become an evolving learning and leading organization.

I think you will see many aspects of that in the results. We are geared to respond to volatility and uncertainties. I believe the way we could respond so quickly as a large organization to the COVID pandemic and the lockdowns and so on is testament that this management system really works. We've been able to ensure role clarity for the business and ensure that it's aligned to our business requirements.

We've made a number of appointments, which we've communicated. I'm not going to go through all of them, but we've appointed a chief operating officer, a chief technical officer; of course, the CEO and CFO of existing positions. Probably within the next quarter, we will complete the structure. And you can see the areas that we still have to make appointments in the diagram.

But essentially, this is an evolution from a management structure to a leadership system. And it's working extremely well for ourselves. I'd like to now move on to the focusing on safe production and operational excellence. First of all, we always start with safety and safe production.

It's been a difficult year adapting to COVID-19. And there's no doubt that our safety performance has been impacted by COVID-19. And that's essentially because of lockdowns, having to stop operations and then to move them up. And essentially, because of this being quite complex and disruptive, we've had to reform teams.

And of course, that in its own right, leads to complex behavioral issues. But we're on top of it and certainly, I think with stability, we will reestablish the very good safety report that we had prior to the COVID issues. We did achieve safe production milestones. Some of them despite COVID.

They are listed there. I'm not going to go through them in detail. But regrettably, we lost nine colleagues in 2020 due to safety-related issues. Our safety strategy, we believe, is solid.

And again, I've presented it previously, so I'm not going to go through it in detail other than say it involves an enabling environment, empowered people and then, of course, world class systems. What I do want to share with you, though, is that we have enough confidence in our safety strategy to actually start targeting international safety standards. The graph on the left-hand side is courtesy of the ICMM. And it's -- the blue bars are companies and their safety performance.

This is public information. That's 2019 data. The green bars are our 2020 current safety performance. You will notice, contrary to what many people would expect, the Sibanye-Stillwater gold operations are not the biggest problem.

Our single biggest problem is our US PGM operations. Needless to say, all three operating segments are targeting, let's call it, international or world-class safety standards. You can see the agencies below that graph. And again, it will be surprising to many of you that four of ground accidents are not the main issues.

You can see issues such as slip and fall and foreign body and trucks and trammy are much bigger agencies to safety-related incidents. What I do want to say, and this is important, that we need to recognize that Sibanye-Stillwater employs more than 80,000 people. That means we have responsibility for the well-being of at least 80,000 people. We do not accept that our operating environment being deep underground and labor intensive is an inhibitor to world-class safety performance.

Reducing risk by closing operations, in my mind, is copping out. And it will have significant unintended consequences for the many people that we employ. If you think by divesting these assets for safety reasons is a way to go, we also don't believe that will solve any safety-related risk as we just pass them on to the buyer of these assets. To realize our purpose of improving lives, Sibanye-Stillwater will ensure that our operations are comparable to international peers.

And I've already alluded to the trajectory that we intend to be on and achieve these results within five years. Our safe production strategy, which was just highlighted on the previous slide, specifically aggressive behavior related issues and real risk reduction. So we remain confident in, although we will be deep underground miners, that we can get to international safety benchmarks and sales. Part of operational excellence is certainly growing the reserve base.

And as you can see, we've also put out recent announcements regarding this. There's been a 40% increase in the South African PGM mineral reserve base, a 7% increase in the US PGM mineral reserve base. And then, of course, our South African gold ore reserves have stayed pretty stable. I think the perception that we pick up from analysts that we may have shorter lives is completely unfounded.

And I want to just focus on the different operations. The South African gold operations, Beatrix, still has five years of life; Driefontein 10 years of life; Kloof, 13 years of life; Burnstone, which we've just announced that we've reinitiated the project, has 20 years of life; and our surface sources two to three years of life; DRD, where we have a 50 plus one interest in has in excess of 20 years of life. So there are not many gold operations in the world that have that type of profile. So our South African gold operations still have long life.

Even more spectacular on our PGM business, the South African PGM operations, you can see Kroondal and Mimosa, 12 years; Marikana, excluding K4, 16 years; Rustenburg, 32 years; and the newly announced K4 project, 51 years. Our surface sources in Rustenburg and Marikana, seven and five years, respectively. Those are not short lives. In the US, we know that the ore body is expensive.

The Stillwater West operation is 25 years of life, Stillwater East also 25 years, East Boulder 39 years. And as I will show you in some of the upcoming slides, there is still an extensive resource, which can add to life of mine. So we certainly -- the perception that we have short life assets is actually incorrect. Just now moving on to production and financial numbers.

The larger diversified production base has underpinned record earnings and cash flows. And you can see it from the graph on the left. You can see in that graph how the net -- correction, how the profitability, which is adjusted EBITDA, has really gone up from the second half of 2019. You can see that in H2, gold was responsible for 19% of adjusted EBITDA.

Our South African PGM business, 60% of adjusted EBITDA and our US PGM business, 21% of adjusted EBITDA. You can also see the red dotted line is our net debt to EBITDA. In other words, our leverage has come to writedown. And in fact, it's actually negative 0.06.

So in other words, we net cash. And we'll talk a bit more about that just now. But this record financial performance has come from the benefits of an enlarged South African PGM production base. Important to note that our gold business has returned to normalized levels.

And we'll now discuss the gold segment, in particular, you will see we are achieving similar levels to 2016 from a profitability point of view. The US has been consistent despite the very significant hardships they've had this year due to the COVID-19 impact. And I will go through that in some detail. Of course, we've had the benefit of higher-pressure metals prices, but I would also suggest that our entry into the sector was well informed, and our analysis of supply and demand has really put us in good state.

So for the record, we made a record ZAR 19.9 billion free cash flow. That's $1.2 billion. We achieved earnings of ZAR 49 billion, which is about $3 billion. And as I said, from a deleveraging point of view, we're now in a net cash position.

So very pleasing to see the transition of the company. Just going through some of the details. As you can see, the South African PGM business contributed 60% of the adjusted earnings, as I mentioned in the previous slide. You can see from this the amount of production from underground and surface.

You can see the average basket price as it's ramped up. You can also see that we've been able to bring down the all-in sustaining costs, especially in the second half of the year, primarily based on synergies and volumes. So if we look at H2 production, it was 40% higher than H1. We achieved normalized production rates after the lockdown and subsequent pullback in November 2020.

We have successfully integrated Marikana. And as we've mentioned previously, we've achieved annual synergies of just under ZAR 2 billion per annum. That's two and a half times the initial ZAR 730 million estimate that we provided when we acquired those assets. The adjusted free cash flow is ZAR 11.7 billion, just over USD 700 million.

And that compares to 2019, where it was only ZAR 2.7 billion, or USD 186 million. Just to note, these are high-margin assets, 60% EBITDA margin for the second half of 2020. I know that this will be a question. So hopefully, we've pre-empted it.

This essentially looks at the prill split of the South African business. It does not -- this is not group. This is the SA PGM business. And you will notice that the very significant role that rhodium has started to plan.

It's 8% of the prill split. That's 46% of the revenue. So very, very substantial contributions from rhodium. Iridium is starting to feature as a valuable metal.

We are the biggest producers of Iridium and ruthenium. As you can see, it makes up 1% of -- iridium makes up 1% of production and ruthenium 5% of production. And electively, they contribute about 1.1% of revenue. So still quite small.

Very important, if you are going to be successful as in terms of achieving operational excellence, is to look at where you are positioned on the cost group, but probably more importantly, to see the changes that you've made or the impact you've been able to have. And I'm very pleased to say that our operating teams and our operating strategy has seen the assets that we have acquired move very substantially down the industry cost groups. We're very pleased with this. It's a very important fact in terms of operational excellence.

And I hope that we can continue on the same trajectory. We are very pleased to be able to provide the market with full-year outlooks for most of our operating segments. Up until now, we've been so busy acquiring and integrating on a regular basis that it's not been possible to provide longer-term outlooks. So this is a break from the past.

You can see for the South African PGM business, that is relatively stable over the next four years. We've provided both volume and cost information. In terms of capital cost, there is a small increase in 2021. And as we've said throughout 2020 post the lockdown, that is a carryover of capital from 2020, and you can see it clearly in the bottom graph.

In terms of our US operations, they contribute 21% of earnings. The graph gives you an indication of underground production and recycling. You can also see how we've benefited from the basket price increasing, and our all-in sustaining costs have been relatively flat. I will talk a little bit more about that when we get to Blitz.

The second half of 2020, production was 3% higher. There was a 2% increase in all-in sustaining costs, primarily due to a 7% increase in taxes and royalty, which, of course, is driven by the increasing basket price. These are very high margin operations, even higher than the South African PGM business. They have 63% EBITDA margins on the underground operations.

Recycling has really delivered and, in fact, delivered 50 -- just over $50 million of EBITDA in 2020 compared to $38 million in 2019. Very pleasing, Fill the Mill project has delivered on time and at budget. We now are at an annual run rate of 40,000 2E ounces. And of course, we'll get the benefits of that through 2021.

Interestingly, the project NPV exceeds $400 million at current spot prices. So that was a great investment. Just looking at the four-year forecast. Again, we've provided you with production and all-in sustaining cost information.

We've also provided you with the capital information, and we split it into ore reserve development and project capital. As I said early on in the presentation, I would allude to the organic growth opportunities at Stillwater. There's over 12 kilometers of resource that can still be mined. We've got the lower East Boulder and the lower Blitz projects that are clearly opportunities.

We will look at those in due course. Underground production, as you can see from the forecast, is holding up to approximately 850,000 2E ounces by 2024. Recycling, also about 850,000 3E ounces. All-in sustaining costs will stabilize at $750 an ounce in 2021 terms.

At the time of acquisition, we projected those to be $550. If you normalize $550 to about 2021, it's about $650. So there's an additional $100 an ounce that we are going to incur, and that's going predominantly into infrastructure investments. We feel that's necessary.

We've been able to review this project. And the delays have also caused an increase in capital costs, which I will also get to shortly. Moving on to Blitz. Blitz is definitely a project that is not replacing production.

That's an additional 300,000 ounces of 2E ounces of production by 2024. As I said, unfortunately, the project capital has increased due to various reasons, but we are comfortable that it makes sense to spend that money. And as I said, the all-in sustaining cost will not quite be as low as we thought. But again, we understand the reasons for that.

Just looking at the South African gold operations. They are contributing 19% of earnings. You can see the production graph on the left-hand side of the slide, underground production and surface production. You can also see how we've benefited from increasing rand gold price, rand per kilogram gold price.

But we've also been able to, with higher volumes, reduce our all-in sustaining cost. So the second half was 43% higher from a production point of view than 2020. That was a successful ramp-up post the COVID-19 lockdown. You would remember there were some concerns with the COVID protocols of whether we would get back to -- normalize the production rates.

I'm very pleased to say we got there in November. And it does look sustainable. There was a 12% reduction in all-in sustaining cost due to the higher volumes. DRD, which we hold a controlling stake in, had also 25% higher production and an all-in sustaining cost of just over ZAR 600,000 per kilogram.

These assets will have good margin, 36% EBITDA margins for the second half of 2020 and, of course, we expect a slightly better performance in 2021 because we should be at steady state. In terms of earnings, they've reduced EBITDA of ZAR 7.8 billion, which is not too shabby, just under $500 million for 2020. And that was a reversal from a loss of ZAR 969 million or $67 million in 2019. Free cash flow was of the order of ZAR 6.4 billion or $386 million for the 2020 year, whereas the previous year were losses.

So very pleased with the gold's operation performance. Again, we are providing a longer-term outlook that we now have more stability. And you can see a fairly stable production and slightly reducing all-in sustaining cost profile. The all-in sustaining cost, as you can see from the top bullet on the right-hand side, is due to the Kloof infrastructure project, which is designed to reduce the infrastructure footprint.

Just like the South African PGM operations, there's a slightly elevated capital profile in 2021 due to the carryover from 2020. And you can see that clearly in the bottom graph. I'd like to just briefly cover the precious metals market. And I'm only really going to highlight, I think, areas that are significantly different or necessary to reinforce.

There's no doubt that platinum fortunes are set to turn. I have been publicly quoted as seeing platinum at $2,000 an ounce in the not too distant future. We worked very hard to introduce what we consider sustainability between platinum and palladium. Palladium, you will see from the graph going forward, has been in substantial deficit for some time, and we had real concerns that that deficit would result in real shortages.

And hence, our financing of research through the asset to a substitution. Very pleased to say that's had a very positive effect, and substitution is taking place as we speak. And you are now starting to see more forecast as to the contribution that substitution is going to make. And you can see its quite significant.

Order catalyst demand will increase from 2.7 million ounces for platinum in 2019 to 4.5 million ounces, almost 2 million ounces more, largely due to substitution in gasoline order kits. That far outweighs any investment in investment demand or jewelry demand, and we're very pleased with that outcome. And certainly, when it comes to rhodium, we are now applying our lines as to use what may be surplus palladium to substitute the rhodium. But there is no doubt that platinum has a really good long-term future.

In terms of palladium, the near term is solid. It moves from a small deficit to a larger deficit in 2021, and that is really as demand recovers. I've spoken about the substitution of palladium with platinum, but I also alluded to our opportunity to partially substitute rhodium with palladium in order kits. And if we don't do that, we do face the potential consequence of a lack of sustainability in the basket.

Just coming to rhodium. The fundamental deficit continues. And this is going to be exacerbated by a decline in primary supply in South Africa, mainly due to a long-term undercapitalization of assets due to depressed prices. As I said, substitution is important.

And in this case, we see rhodium being substituted in the glass industry by platinum. That will remove 20,000 ounces of industrial demand, which will still not be enough to offset the deficit you see here. But it will make rhodium an auto maker because of its 90% exposure to the automobile sector. There's been a lot of questions about, despite the very slow auto demand growth, why the demand for the metals has been as strong as it is.

And I think that's simply due to the loadings, the additional loadings required by the increasing environmental standards that have come in over the last while. So this graph shows you the metals and their profile in terms of demand which, as I've said, is driven by the vehicle demand, which is the black dotted line, but also the metals are impacted by loadings, increased loadings, and that's why you don't see the same profile. Just in terms of the gold market. As you've seen, about 20% of our earnings will come from gold.

We like gold. We wish we had a larger gold base, and that is something that we continue to work on. But in terms of gold, I think low interest rates are going to certainly drive gold investment. And we see low interest rates as something that is not going to change in the short term.

In terms of consumer demand, largely from emerging markets, as we go through the COVID recoveries, we see consumer demand recovering as well. There will be, in our view, moderate net purchases from central banks. And our view is informed by the World Gold Council, of which we are a member. I suppose production is something we need to consider.

It has been impacted in 2020 by COVID-related issues. So it will return, and it has returned to historical levels. I think the real question mark remains about the lack of investment in new projects, the lack of new projects per se, the lack of new discoveries and how sustainable current production levels are. So this is the market that we think is going to be robust and possibly even be squeezed in the not to foreseeable future.

At this stage, I'd like to hand over to Charl to discuss the financial results and share with you the capital allocation model that was approved by the board. Thank you, Charl.

Charl Keyter -- Chief Financial Officer

Thank you, Neal, and good morning to everyone on this call. 2020 was written against the backdrop of the global coronavirus pandemic. The events of 2020 brought new challenges that I believe very few people were prepared for. It changed the way we live and how we connect with each other.

2020 was as sobering as it was defining for Sibanye-Stillwater. And all credit must go to our operational, medical and support staff for the exceptional results I'm about to share with you. Starting with our income statement. Revenue increased 75% year on year to ZAR 127 billion.

Production was maintained in line with 2019 despite the challenges imposed by COVID-19, and that afforded us the opportunity to take advantage of elevated commodity prices. On a per unit basis, revenue for our South African PGM operations was up 83% to ZAR 36,000 -- ZAR 36,700 per 4E ounce; for the US PGM operations, up 53% to $1,900 per 2E ounce. And for our South African gold operations, up 43% to ZAR 925,000 per kilogram. Cost of sales was up 35%.

However, the inclusion of Marikana for 12 months compared to seven months in 2019 accounted for ZAR 5 billion. Secondly, as the prices for platinum, palladium and rhodium increased, it has a direct impact on the US recycling costs. This price and exchange rate movement accounted for ZAR 10.5 billion of the additional costs. Adjusted EBITDA for 2020 was up 230% to ZAR 49.4 billion, or $3 billion.

Interestingly, the adjusted EBITDA for quarter three of ZAR 15.6 billion and for quarter four of ZAR 17.3 billion, on its own, exceeded the adjusted EBITDA for the entire 2019. I'm also happy to report that we closed out the 2023 convertible bond well ahead of time, and this has assisted us in the downward path of our debt reduction. The net result is that earnings per share for 2020 was up 536 times or for the statistically minded 53,600%. And this translates into a final dividend of 321 cents per share, bringing the full-year dividend to 371 cents per share or a yield of just under 9% using the average share price for 2020.

Moving on to the next page. I'm extremely pleased to report that our deleveraging efforts have been achieved and we are now well within reach of our internal comfort level of gross debt of about ZAR 15 billion or $1 billion. Cash at the end of 2020 was ZAR 20 billion, and that was up three and a half times from 2019. At the end of 2020, our gross debt was ZAR 17 billion or $1.2 billion compared to ZAR 26.6 billion or $1.9 billion in 2019.

The result is that we are now in a net cash position of ZAR 3 billion at the end of 2020 compared to a net debt position of ZAR 21 billion at the end of 2019. That was a ZAR 24 billion swing. We further estimate that our interest expense will reduce by ZAR 350 million in 2021, and we are contemplating a reduction and refinance of our 2022 and 2025 bonds toward the middle of 2021 to take advantage of record low interest rates. Moving on.

Looking at how we allocate available capital. If we start with the cash generated by our operations, a total just over ZAR 45 billion. After accounting for staying business capex, net interest and royalties and taxes, available cash was ZAR 31 billion. The ZAR 31 billion was further allocated as follows.

ZAR 11 billion to our shareholders in the form of dividends and ZAR 2.6 billion toward growth projects. The balance was retained for working capital, debt repayment and increased liquidity. Turning to the next slide. I'm sure this slide requires very little explanation.

We are pleased to report that we have declared a final dividend of 321 cents per share, bringing the full-year number to 371 cents per share, which is at the top end of our payout percentage. Normalized earnings for 2020 was just under ZAR 31 billion, and that translated into a dividend distribution of ZAR 10.7 billion for 2020 to our ordinary shareholders. And I think the graph on the right just highlights how significant this is compared to previous periods. My last slide is on capital allocation.

It is important to note that over the next five years, after accounting for all operational expenditures, interest, taxes, royalties and capital, that we estimate that we will generate between ZAR 150 billion and ZAR 200 billion in cash, using a range of prices ranging from consensus to spot. I appreciate that commodity prices are both dynamic and volatile, but we deemed it prudent to show what the allocation priorities will be. I would like to stress that the priorities will be tackled in parallel and not necessarily sequential. Our first priority is investment into our ore bodies in the form of project capital, and Neal will speak to the significant pipeline of internal opportunities that we have.

Based on the projects that we have proposed to our board, which are K4, Klipfontein and Burnstone, the project capital required is estimated at ZAR 6.2 billion over the life of these projects with ZAR 1.5 billion of project capital expenditure estimated for 2021. Our second priority would be to galvanize our balance sheet. And this will include a cash liquidity buffer of ZAR 5 billion with the balance of ZAR 10 billion in available undrawn facilities. This equates to two months of operational expenditures.

We also anticipate to build up a debt buffer over the next three to five years of roughly $1 billion. This will be kept on balance sheet and will keep us in a neutral debt-to-cash position and will shield us from any bumps in the road going forward. This should also significantly improve our credit metrics as we can no longer rely on the SA sovereign rating to anchor or support us. The next priority is dividends.

We would like to retain our position as a leading dividend payer. In order for us to do that, dividends have to be repeatable and predictable. We estimate that based on an equity rerating of between 20 and 40%, that we will pay a dividend of between ZAR 9 billion and ZAR 10 billion per annum, which should translate into a yield of between 2% and 4%. And we have already started that journey in 2020 with a payout of ZAR 10.7 billion.

Priority No. 4 will be on debt management. And as highlighted previously, we anticipate reducing and refinancing our 2022 and 2025 bonds toward the middle of 2021 to take advantage of lower interest rates. We receive a lot of inquiries about share buybacks.

We have taken a first step, and that is to change our long-term incentive plan to a cash settled scheme, which, under normal circumstances would have resulted in a dilution of about 3 to 5% over a five-year period. In addition, we also recently completed the buyback of odd lot shares of roughly half a percent of our issued shares. And then lastly, should there be further cash left on the table, this will flow back to you in the form of increased dividends. I hope this gives you some idea and clarifies the capital allocation priorities going forward.

Thank you, ladies and gentlemen. I will now hand back to Neal to take us through the final part of the presentation.

Neal Froneman

OK. Thank you, Charl. And for those of you listening to us, we are on the last part of the presentation. And I'm just going to share my screen again.

Just to recap, we started with our primary focus area of embedding ESG excellence as the way we do business. We then moved on through our strategic focus areas of building a values-based culture. We looked at focusing on safe production and operational excellence. Charl has just completed the financial results and has shared with you the optimizing of capital allocation.

If we continue to look at our last two strategic focus areas, the one that I will start with is prospering in South Africa's investment climate. So we've said a lot in recent presentations about our concerns. I think we're now able to show some very specific examples of where the country may be -- not maybe -- will be missing on. So I think it starts from -- first of all, we need to recognize, and I don't think anybody disputes is that the state of the South African economy is very fragile.

And the ongoing COVID-19 pandemic continues to wreak havoc. So economic recovery, in our view, is absolutely necessary to alleviate poverty and inequality. And our concern has been that current policies and ideologies inhibit investment. There are critical needs to address these investment barriers to drive economic recovery.

Right now, we hear talk of a commodity super cycle. So with that positive outlook, there's an opportunity for the mining industry to significantly contribute to the economic growth of South Africa. And in fact, the Minerals Council has recently estimated that ZAR 20 billion of potential investment opportunities are available in a supportive environment, but the environment is not supportive. And why is it not supportive, there's uncertain regulatory policy.

There are risks related to power reliability and rapidly escalating rising power costs, and these are increasing investment hurdle rates. And it's only the best projects such as K4 and Burnstone and perhaps a few others in the industry that may come to fruition under these types of conditions. They meet the current hurdle rates, which are high. We've just shown our South African project pipeline.

And there are many, many other projects that will not pass these hurdle rates, and that's the lost opportunity. And I am sure you will find the same thing in many other South African mining companies and South African companies. So in our view, its really very urgent for economic reforms and stakeholder alignment if we are as a collective, going to address poverty and inequality. It is a crisis, and we do need government to make the necessary changes to create an investment friendly environment.

Having said that, you will see these projects that we've announced and we're happy to make investments exceed the hurdle rates that are required under these conditions, and if we look at K4, it's certainly a Tier 1 PGM project that's unrivaled, and if you look at some of the key statistics, it requires only ZAR 3.9 billion of capital which will be spent over about eight years, obviously the majority upfront. It is at steady state going to produce 250,000 4E ounces per year. The average operating cost is 16 -- just over ZAR 16,000 for 4E ounce. That means at current spot prices, it's extremely profitable.

At our assumed project prices, it's got a six-year payback at spot at four years. That's incredible for a project of this nature, and it will produce 11.5 million 4E ounces over 50-year life -- 50 years. The net present value, and this is at a 15% real discount rate, and this is the sort of hurdles that you have to apply in these sorts of conditions. That's ZAR 3 billion at assumed project prices and ZAR 21 billion at current spot basket prices.

It has an internal rate of return of 33% at assumed prices, but 80% at spot. So an incredible project, and we're very fortunate to have acquired this with the Lonmin assets. We will be mining both the Merensky and the UG2 reefs down to a depth of 1,200-odd meters. So it's not ultra-deep.

We benefit from Sunk capital of ZAR 4.4 billion that was invested by Lonmin. We also acquire or we did acquire with the assets, 130,000 tonnes per month concentrator. We've got equipped and functional shafts, both ventilation and a main shaft. We've got existing surface infrastructure, and the project is partially developed.

So that's not a lot of money to invest in a project with a 50-year life, and it's because of the substantial investment that's taken place in the past. So that's all the commercial and the technical mining issues. We, specifically, with acquisitions or projects had to quantify for our board what the regional, social and economic benefits are as well. So first of all, this ensures the sustainability of the Marikana operations over 50 years.

It's a significant investment in the local economy. That provides 4,380 steady state jobs. And it's meaningful from an opportunities point of view for local procurement, SMME development and skills transfer. So this should really have a very positive impact on social and economic benefits in the region.

I'm also very pleased to announce that the Burnstone project has been approved. You would remember that when we acquired the store, the assets, we had to curtail all capital expenditure. During that break, we have maintained the assets, done a little bit of project development. But essentially, we've curbed all unnecessary expenditure.

And of course, that's also given us the opportunity to review the project. And although it was never stopped because there was a fall through of the project; we can certainly, with new confidence, restart this project. So this project is in 2021 terms. And just to be clear, all the figures I quoted for K4 were also 2021.

But this project, we will spend ZAR 2.3 billion, over 14 years to complete the project. It will have average steady-state production of 138,000, just under 140,000 ounces per annum. So it's a significant producer of gold. Importantly, it will have an average operating cost of around ZAR 400,000 per kilogram again.

That's going to mean it's a high-margin project. It will produce 2 million ounces over a 21-year period. The net present value using a 15% real discount rate is approximately ZAR 1.4 billion at assumed prices. And remember, we, for budgeting and project work, we are much more conservative than spot.

At spot, the net present value is just under ZAR 4 billion. Internal rate of return, 24% at assumed prices, but it's spot just under 40%. So seven-year payback, I think great value creation opportunity for our shareholders. Again, we are always asked to focus on the regional and economic benefits.

The Balfour area where this project is located, has got severe socioeconomic challenges. Unemployment is more than 30%. Youth unemployment is approximately 44%. So this project will create 2,500 long-term jobs and contribute very meaningful to that region as well.

This is a project we acquired with the Wits Gold acquisition in 2013. We will be mining Kimberly reef, which my team has substantial experience with. It's a very channelized reef, not everybody can mine it. And the average depth of this mine will be 550 meters.

So it is actually really shallow. Again, there's lots of existing infrastructure that was invested in by the previous owners. We have a functioning metallurgical facility, established tailings storage facilities, equipped and functional vertical shafts and declines, surface infrastructure and so on. Being a very channelized orebody, the way to mine a channelized orebody is to know exactly what's in front of you.

And you would see that we have done extensive underground development and infrastructure work, to give us the confidence that we know exactly where these channels are and how to mine them. So with that, I'd like to move on to pursuing value-accretive growth based on a strengthened equity rating. And I think let's pick up those in two separate focused slides. First of all, value-accretive growth.

Well, I don't think anyone can argue about the fact that our entry into PGMs was impeccably timed. For a total investment of ZAR 43 million, or about $3 billion, we have acquired assets, high-quality assets, established ourselves as the No. 1 PGM producer. And in fact, that investment is actually only equivalent to the 2020 adjusted EBITDA.

So this was -- this was really low-cost acquisitions and were exceptionally well timed. And of course, we would like to duplicate this type of value-accretive growth in some of our other focus areas. So let's just talk about our thinking. And we have shared our Sigmoid curve with you.

The base of this company was built off our gold business, which we transformed. We're positioned into an industry-leading dividend payer that allowed us to generate the cash and obtain the credibility and support from our shareholders to acquire South African PGM assets. We made our move after substantial analysis and then the transforming acquisition of Stillwater was conducted in 2017, which provided us with an international precious metal space and probably the best geographical diversity in the PGM sector. That is the same type of recipe that we would like to apply in two more key areas.

But before I go to those, I just want to say, and I said it earlier in the presentation that our gold base has become relatively small to the rest of the company. And as we've said in previous presentations, we remain interested in increasing our gold base, but we battled to find value within the sector that we continue to look. In terms of the next Sigmoid curve, that is a -- is ready to participate in the battery metals growth and the electric drive train. And as you would all know, we acquired SFA Oxford to help us develop a battery metals or a high-tech metal strategy.

And we did that because we believe it's complementary to our PGM investment case. And certainly, as we've done this work, we've seen that, our approach to fabricators and the supply chain are all very, very meaningful in the sector as well. So both PGMs and battery metals are components of the global auto market and a part of the green future. So it's exactly the right type of business we would like to be exposed to.

The analysis over the last two years has identified the key metals. It's identified the fundamentals are robust. And it's identified value accretive opportunities. And those are being pursued as we speak.

It is certainly positioning Sibanye-Stillwater as a provider of strategic metals for tomorrow's green technologies. And on that note, we are already starting to plan our first Sigmoid curve, which involves making sure that we are part of the hydrogen economy. We've got good exposure, as I said in the ESG section, to parts of the hydrogen economy. And I highlighted the metals that give us that exposure.

So let me then conclude. And we have certainly seen our share price rerate. And if you look at from our initial beginnings in 2013, we've outperformed everyone on the list by a long way. And, of course, we're very proud of that.

And certainly, the rerating that I've been complaining about, and the undervaluation that I've been describing is being reduced. We have certainly seen some significant growth, and I'm very pleased. What I do want to share with you is that although we've seen very significant rerating, we're still offering a very significant value on just about any metric you can apply. If you look at enterprise value per EBITDA for 2021 and 2022, I think we are still cheap.

It may look like we have not moved, but I think what is becoming very clear is that our earnings are very, very significant. And so, our EBITDA is growing, and we need to see the enterprise value grow in line with the earnings. And it will happen. We know exactly that as further delivery, as further disciplined capital allocation, further disciplined value-accretive external growth and so on.

So we look forward to that rating. But for those of you who might think we're expensive, you can see on an enterprise value per EBITDA basis, we're not expensive. There's still substantial upside. If you look at price on a cash flow per share basis, again, you can see we are relatively cheap compared to senior PGM companies, intermediate gold and senior gold companies.

And again, I think the cash flow per share is increasing at a rapid rate. And even though our price is going up, it's not going up as quickly as the cash flow per share basis. So again, that just represents a cheap entry point into our stock. If you look at our net debt to EBITDA, and remember, this was seen as a significant risk and a significant reason why we were undervalued, well, of course, that's turned into a net cash position.

And you can see from a net cash position, we really had negative net debt to EBITDAs, one of the highest net debt-to-EBITDA positions in the list. If you look at an enterprise value and market cap, as I said, we've seen significant growth, and I'm very pleased about that. We used to be below intermediate gold. I think we're proud to say that some of the rerating has come through.

And we now find ourselves between intermediate gold and senior gold. And we look forward to that changing in the not too distant future, as there's recognition about the sustainability and the earnings potential of this company. And of course, we declared a very significant dividend, which we believe is sustainable and repeatable and going to be predictable. So let me then conclude.

And I think you can clearly see that we've had solid, consistent strategic delivery. Our messaging is consistent. Our strategy is consistent. And quarter after quarter, we've delivered on all our strategic focus areas.

We have a leading position in global precious metals and not too recently, people outside of the industry have described the PGM sector as entering a super cycle, and I think they are not wrong. We want to be the more exposed to a green future. We're already very well positioned for it, but you can see our focus on battery metals and the hydrogen economy is going to ensure that we are well positioned for a green future. Our investment in DRD, our investment in recycling are also green credentials.

We've committed to ESG excellence and I spent a significant part of this presentation showing you what we've done. I've also made significant commitments to achieve as a deep drill underground miner international safety standards. We have a strategy that has been shown to work, and we believe that is the base on which to make these safety commitments and achievements. We have a very strong balance sheet.

We have very substantial financial flexibility. And as Charl shared with you, we are going to be very disciplined in the way we allocate capital. And just to summarize, we will fund our projects to create sustainability. We will ensure that we've got significant reserves to cover our debt.

We will pay predictable and consistent dividends. We will pay down our debt when appropriate. We will look at value accretive opportunities in terms of M&A. And of course, at the right time, we will continue with our share buyback program.

The first step in that was really converting our long-term incentive scheme to a cash cycles scheme. So those are our capital allocation priorities, and that is the discipline that we will continue to impart. We have unrivaled projects to unlock, which will create value to all stakeholders. Our tech metal strategy to diversify in the future, that the value is well advanced.

And as I've said previously, I'd be surprised not to make one or two acquisitions in this area during this year. OK. Finally, you would have seen that we are offering substantial relative value despite a very significant improvement in our rating and share price. So with that, I'd like to close what has been a very long delivery, but a delivery, I hope that you enjoyed and that you found interesting.

We had a lot of interesting news and new developments to share with you. I hope you found it interesting and enjoyable. We've come to the end. And certainly, together with my team, I'll be happy to take any questions that you may have.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] Do we have any questions from the webcast at the moment?

James Wellsted -- Head of Investor Relations

Yeah. I've got some questions. I will just relay them, if that's OK. The first one is from Martin Creamer.

And its whether -- asks whether Sibanye-Stillwater is considering green hydrogen generation, and the use of PGM hydrogen fuel cells to provide mobility on our sites. And then, effect on the progress on the 50-megawatt solar PV plant. And then, the investigation to the 200 megawatts of additional solar PV storage wind projects, when do we expect those to be complete?

Neal Froneman

Thanks, James. And Martin, good questions. Certainly, it's early stages for us in terms of the hydrogen economy. And the answer to your questions regarding that is probably all yes.

But we probably have another nine months to a year of work to get to a position where we can actually outline in more detail our hydrogen strategy. And as you could see, that's the fifth Sigmoid curve and we've only just completed the fourth Sigmoid curve. So certainly, the hydrogen economy, I mean in general, we think, is you have to stay, we think it's going to be very exciting. It offers a number of opportunities, but we are still assessing them.

In terms of the balance of your questions, the 50-megawatt PV plant is the one that we've been working on for some years now. That's on the west bit next to Lebanon that was originally going to be 150 megawatts, but because of the uncertainty around reeling and some of those issues, we are going to rather keep it at 50 megawatts, and then we are looking at a 200-megawatt plant in the Rustenburg area for our Rustenburg operations. Yeah. I hope that answers your questions, Martin.

James Wellsted -- Head of Investor Relations

The second question, again, from Martin, is again related to the hydrogen economy, wanting to ask, what is the projected value of the hydrogen economy and when is the impact on PGM demand likely to reach a significant level? And then, also what roles will PGM play in the hydrogen economy and what has been done to ensure adequate PGM supply, which I think we've answered in some part of the project.

Neal Froneman

Yeah. Yeah. Thanks, James. And certainly, we also covered the PGMs that will certainly play a role in the hydrogen economy are platinum, Iridium and ruthenium.

We are starting to see demand forecasts being impacted by the hydrogen economy in the second half of this decade. I think that's conservative. I think you're going to see that moving forward. There is no doubt that the hydrogen economy is going to be very disruptive and something that we, as I've said, would want to be associated with.

Thanks, James. Any other questions?

James Wellsted -- Head of Investor Relations

Yeah. I've got a couple more questions. The next one comes from [Inaudible]. If you don't mind, I won't, try and pronounce the same name right now.

Just views on the rhodium revenue contribution going forward, given that it seems to be at an unsustainable level currently.

Neal Froneman

Yeah. But it's -- I think you've got to ask the question, is it really unsustainable. It seems like a lot of money, it's not really a lot of money when it comes to the end users. It's used in relatively small amounts within automobiles.

So that's the first thing. I don't think there's any alternatives. In the past, there were alternatives because the environmental and regulatory environment had a lot more flexibility in it. So certainly, I don't think they are really alternatives.

And when you say not sustainable, I assume you're referring to demand construction. So I do think that it's here for now. I think what we have to do to be responsible is to assist the end users to find alternatives. And as I alluded to in the presentation, we've been very successful in assisting end users to reduce their costs through the substitution of palladium with platinum.

And of course, the next step is in that approach is actually substituting rhodium, and you can't substitute all of it, but some rhodium with palladium. We would also note from the presentation that substitution in the glass industry is already taking place. So there will be moves. And that's why you actually have to look at these PGMs basket because a move to avoid an increase in the rhodium price is really just going to drive up another price and so on.

So the fundamentals remain very good for all the PGMs, in fact. Thanks, James.

James Wellsted -- Head of Investor Relations

And the next question is from Nkateko of Investec, asking what the probability of paying a dividend significantly above the 35% of normalized earnings threshold in the near term is considering organic growth investments and other projects whose potential is still being assessed.

Neal Froneman

Yeah. Certainly, what we've started with, as Charl explained, is a predictable and a sustainable dividend. We've taken a five-year view. So I would suggest you can consider this as a base or perhaps a minimum.

We also have done significant research and paying dividend or having dividend yields much above 40% doesn't often result in value to the shareholder. So we would like to see our share price go up. And once our share price is up, we may have to raise the policy level to ensure that we remain an industry-leading dividend payer. And certainly, I think there's going to be a lot of one-offs in the industry.

We are looking to be sustainable, predictable and quite consistent. So as our share price rises, we will assess whether we need to increase the -- or change the policy or pay dividends in excess of the 35% of normalized earnings. Charl referred to that in our capital allocation model. If we cannot create more value by investing in our project, by doing value-accretive M&A growth, we will certainly return that cash back to shareholders.

But I'd suggest as management, we would have partially failed if we do that. Thank you.

James Wellsted -- Head of Investor Relations

The next one is also from Nkateko. Just asking to get a bit more color on the South African PGM production profile for 2024. And what will the Marikana and Rustenburg contributions do?

Neal Froneman

Yeah. If I could suggest that that information is all in the slide. And probably, if there's more detail required, we'd be very happy offline to provide that information, James. I'm sure there's lots of other questions.

I don't want to get into the nuts and bolts. So if that's alright with everybody, I would propose we do that offline. But it is in the document section.

James Wellsted -- Head of Investor Relations

No problem. Yeah. I'll follow-up offline, Neal, but I think the profile is pretty stable at least till 2024. So I'll follow-up on that.

The next question is from Adrian Hammond. Just asks, given plans for share buybacks, will future M&A be made with cash only, or will you still consider equity?

Neal Froneman

Adrian, that's a good question. I think that it's very transaction dependent. There's no doubt that we've seen a rerating of our share. And certainly, I think equity could be part of that.

But I also want to say that utilizing a bit of cash can improve the transaction from a metrics point of view. So it will be also for courses. What we are not going to do is we are not going to take on excessive debt. We know that our debt raising capacity is probably around 12 to $13 billion.

I can assure you, we're not going to go and raise 12 to $13 billion of cash and take on that sort of leverage. A few billion dollars, absolutely. No reason why that would not make sense. But it will really be very dependent on the target and the value accretion metrics related to that specific target.

But certainly, we can consider equity looking forward from then.

James Wellsted -- Head of Investor Relations

A follow-up question from Adrian, actually, he's got two more. In H1, the US PGM operations recorded free cash flow of close to ZAR 5 billion. But then in the second half of this year, there was about a ZAR 2 billion loss. Can you clarify what drove this? And how much working capital unwind is expected in the first half of this year? We'll have Charl respond to that.

Neal Froneman

Charl, yeah. Would you pick that up? I'm sure some of the answer is related to working capital? Go ahead.

Charl Keyter -- Chief Financial Officer

Yeah. So Adrian, really, the big swing there is the change in working capital, specifically with our recycling facility. You remember that in half one of 2020, we actually slowed it down specifically to preserve liquidity for the group as a whole, and the second reason was also because of COVID-19, the feed material wasn't coming through as previously. However, in the second half, we have ramped that back up to normalized levels.

And the simple maths there is the price of platinum, palladium and rhodium has got a direct relationship with the inventory. And if you look at just use -- and remember, they treat the three metals. So if you use the SA PGM prices as a proxy, prices went up by about 70%. And so, that will have a direct impact on the working capital contained in that facility.

That has normalized now. It has stabilized. Again, it's all pricing dependent, but what I can say is we are looking at alternatives to see how we can free up that working capital that is tied up in the facility either through some inventory financing or some other ways of releasing debt. So at this point in time, we don't expect it to consume any further, but we also don't expect a massive release without us looking at some form of financing.

Neal Froneman

Thanks, Charl. James?

James Wellsted -- Head of Investor Relations

Yeah. Again, from Adrian. At spot, free cash flow, what's your capex project requirements. What will you do with all the leftover cash? Is the dividend fixed at ZAR 9 billion to ZAR 10 billion this year, while you seek M&A opportunity?

Neal Froneman

OK. Thanks, Adrian. I wouldn't say the dividend is fixed at an absolute number. Certainly, if you look at how commodity prices have moved, if you consider that we should produce more for this year because we should not have the disruptions of a lockdown in the start-up, we are at normalized levels of productions.

So good production or more stable production, coupled with improved commodity prices even with reference to 2020 is going to result in more earnings. And remember that our dividend policy pays out as a percentage of normalized earning. So the absolute numbers should go up if you believe there's going to be an increasing earnings profile, and I do believe that there will be. I think as our capital allocation model shows, we're not averse to paying out cash that is in excess of our requirements.

In fact, we would be happy to do that. But I would also argue that there are a number of value accretive opportunities in the pipeline where we believe we can create more value than just paying out big rands of dividends. And we do want to be an industry-leading dividend payer, and that will certainly drive our thinking. Thanks, James.

James Wellsted -- Head of Investor Relations

And then the last question on the webcast, or from the webcast from Chris Nicholson. And he asks how we should think about K4 production and what it means for the overall SA PGM profile over the longer term. So from 2025 to 2030, do we consider replacement or growth? And then the second question, which I think is similar but talking about how much working capital we can expect to be released in 2021 I think from the overall group and if we can give a dollar or rand amount in terms of what's going to come up from recycling.

Neal Froneman

Yeah. OK. I'll ask Charl to pick up the last part of that question. But in the meantime and listen, I'm aware that the webcast froze and probably some of the slides that we presented actually covered these areas.

So I understand why we're getting the questions. But Chris, it's really replacement ounces. It does ramp up to about 250,000 4E ounces, it's at steady state, but the details of that in those graphs are contained within the presentation, which I understood, froze up. So again, we would be very happy to take the analysts off-line through any of these details.

But at a high level, replacement ounces providing steady state for our group looking at quite far. So perhaps with that, Charl, you could just pick up on the working capital?

Charl Keyter -- Chief Financial Officer

Yeah. Thank you, Neal. And as I've said, in the US, our inventory position has stabilized. So we're not expecting any major swings in all out.

I have said this that we are looking at some form of inventory financing, and that should release some working capital. But again, that's work in process. And once we have clarity on that, we can start sharing it with you. At our South African operations, specifically at PGM, the inventory increased by just under ZAR 2 billion, and a lot of that is expected to come out in the first half of this year.

So we can expect about ZAR 2 billion from South Africa. But as I said, until we have a sustainable solution for the US, that's where the number will stay.

Neal Froneman

Thanks, Charl. James, any further questions?

James Wellsted -- Head of Investor Relations

Not from the webcast, but I believe there are quite a few questions coming in from the pool. I want to apologize upfront for the technical glitch on the webcast and to let people know that we will have a link to the complete presentation set up on our website and on YouTube very shortly after this meeting ends. We can go to the call now?

Operator

Thank you, sir. The first question we have is from Dominic O'Kane from J.P. Morgan.

Dominic O'Kane -- J.P.Morgan Cazenove -- Analyst

Hi, guys. Two questions from me. You talked extensively about the value proposition and specifically, with regards to kind of M&A ambitions. And I just wanted to just understand what you mean by the value proposition.

So you mentioned you have aspirations in the gold sector and also battery metals. And if we look at the valuation characteristics of those two different sectors, they're very, very different. And specifically, you have a number of maybe close to home gold producers that have smaller market caps than Sibanye and comparable trading multiples, near-term trading multiples, that trade at significant discounts to that NPV. Would that not represent a better value proposition to Sibanye than maybe more expensive overseas battery metals type entries? So that's my first question.

And then my second question relates to K4. Could you maybe just articulate what you're doing differently, if anything, versus the original Lonmin mine plan? Are you able to extract significant synergies at K4? And if so, could you quantify those synergies? And also, could you just maybe articulate what the longer terms of processing strategy is with K4 up and running?

Neal Froneman

OK. Thanks, Dominic, and good questions. Let me deal with the value proposition question first because it's a very good question. Certainly, I think we can say that we do not want to buy gold companies that generally have assets in jurisdictions that are not going to improve our geographical diversity and hence, our risk profile.

So certainly, that excludes companies that have a predominance of South African assets or predominance of assets perhaps in Central Africa and so on. Those are concerns for us. That's not going to help our discount. You're spot on in terms of the trading multiples of certain gold companies domicile in South Africa.

They clearly are part of the group we look at. I think that we certainly look also for opportunities in terms of North American listed companies. But, of course, we have the challenge of trading multiples. So they all form part of the universe.

And of course, it's a matter of identifying where you can do the right thing in the interest of all shareholders. There's absolutely no doubt in my mind that consolidation is necessary. It is going to happen. You're either going to be consolidated or you can drive consolidation.

You have to become relevant. Even at $13 billion, we're still not relevant. We need to be at least $20 billion-plus. Of course, we can get thereby sitting on our hands and letting the earnings of this company flow through.

But we're not a management team that sits on our hands. The value proposition is that we have created exceptional value through M&A. We've done very smart M&A. And of course, what's only visible is what we've done.

We've walked away from many opportunities as well, which are not well known. So we do want to use our M&A still in terms of the value proposition. Now, so you're spot on in terms of gold, and it just forms part of our universe, and we continue to analyze. In terms of battery metal space, there are opportunities despite -- and you can look at the trading multiples.

We have found a number of opportunities, but it's actually a slightly different strategy. It's a strategy, not so much of total ownership but of partnering with certain organizations and organizations that have the requisite skills or the requisite links. And you will see that unfolding over the next year, perhaps with a few small steps, but certainly, there will be smart steps when you analyze them. But we can find value in the battery metal space.

We're not going to do one or the other. We need to do both. We need to build our gold business, and we need to benefit from all the work we've done in the battery metal space. So those things will probably unfold together over the next year.

So that's really the value proposition. I think coming on to your second question in terms of K4, certainly, I think you've seen from the presentation, and I'm not sure where the webcast jammed up, but we displayed very significant synergies in the Marikana acquisition, whereas we originally identified ZAR 730 million of synergies, we've been able to bank 1.84. Now, some of that is through overheads. I can tell you that technical interventions underground have resulted in changed mining layouts, the introduction of technology where appropriate.

And of course, we believe, better management structure. Now, all of that has been carried through into K4. It's obviously early days, but K4 deserves to be perhaps one of our showcase mine. So it's going to get further attention in terms of appropriate technology and new thinking and so on.

But what you see, or you will see from the information that we presented is that it's got a very solid base case. There is upside on that. We've been, I think, quite conservative. So I hope that answers your questions, Dominic.

Dominic O'Kane -- J.P.Morgan Cazenove -- Analyst

Thank you. Thanks very much.

Operator

Thank you. the next question we have is from Patrick Mann from Bank of America.

Patrick Mann -- Bank of America Merrill Lynch -- Analyst

Hi. Good day, guys. Thank you very much for the call. I just wanted to ask a question around the acquisitions in the technical sector.

You said there might be one or two on the call this year. Are you able to give us kind of a sort of size acquisition that you're looking at making? I mean, are you looking to kind of acquire a Tier 1 asset and really become a big player? Or is it more a case of kind of dipping your toe in the water or picking up something for value. And then I had another question for Charl. Just on the 130 -- I think it was 130 to 200 million in free cash flow range over the next five years cumulatively.

I mean, does that range include spot even with 20,000-plus rhodium? Or could you maybe give us a bit more indication around that range? Because I think at spot prices, it looks like it could be north of that. I just want to triple check that.

Neal Froneman

Thanks, Patrick. And Charl, if you can take the last part of Patrick's question, once I'm finished. Patrick, in terms of the high-tech metals strategy, we're not going to -- we're going to be dipping our toe in the water. And there will be a few, I would say, medium-sized acquisitions, in my view.

So it certainly has to fit in with our capital allocation model. If there's going to be a number of acquisitions, we have to -- clearly, we can't affect our ability to pay dividends and so on. So they're going to be, I would say, medium to small, perhaps with some real just, let's say, early stage entries. Won't be greenfields, that's not our business model, but it would be projects that are close to sort of development and so on.

So it's smaller acquisitions, smaller, more affordable acquisitions. If I give you the numbers, the exact numbers, you will probably be able to pinpoint the targets. I can't do that. But I hope that gives you some guidance as to our thinking.

Charl?

Charl Keyter -- Chief Financial Officer

Patrick, to your second question, obviously, you have to peg spot at a point in time. It's difficult to start pegging rhodium. It was just 15,000 the other day. Now, it's 21,000.

But to give you some color in terms of spot, when we looked at these numbers, gold were as it is today, roughly about ZAR 850,000 a kilo. Our 4E basket for PGMs was about ZAR 40,000 per 4E ounce. And for our US operations, it was about $1,900 an ounce. Now, clearly, we are already above that.

Looking at today for 4E PGM, 47,000; 2E PGMs, 2,200. So yeah, we just took a number at a point in time to inform what the priorities will be in terms of capital allocation. But I think it's important that we just show the careful thinking and as I said to our board earlier, it requires a steady hand now, specifically when you are cash generative to make sure that you do make the right decisions based on what's ahead of you. So Patrick, your numbers are not wrong.

But what I'm saying is we just need to peg it at a point in time and then working back and see what those priorities will be.

Patrick Mann -- Bank of America Merrill Lynch -- Analyst

Perfect. Thank you very much for your content. Thank you.

Operator

Thank you. the next question we have is from Wade Napier from AVO Capital Markets.

Wade Napier -- Co-Chief Investment Officer

Hi, guys. Thanks for the presentation. Just a couple of questions from me. Firstly, with reference to your statements now that you've got several sort of more value-accretive opportunities sort of organically, I mean, having announced sort of K4 and Burnstone today, how many more projects do you -- would you feel comfortable sort of undertaking simultaneously? Because, I mean, as we announce sort of more projects means sort of more execution risk.

And I mean, I think from Blitz, that project is also sort of not necessarily gone to plan. So what is the sort of appetite to do projects internally? And then second one is just in terms of the cost -- the unit cost numbers out of SA PGMs. I mean you're looking for production growth of circa 10 to 15% in 2021, but you still got sort of fairly substantial unit cost inflation. Can you just sort of unpack that for me, quick?

Neal Froneman

Yeah. OK. So let me come back to your first question in terms of the number of projects that we would take on at any one time. Look, first of all, I think that the message this morning was that at this stage, none of the other projects will probably meet the hurdle rates that we require to address the risk -- the investment risk in South Africa.

So that's the first point. And it's actually said in that we really need a change in policy and invest the friendliness to commit much more. The projects just don't give us the sort of, let's call it flexibility to deal with some of the issues. So that's the first thing.

There's an automatic constraint. I think you're absolutely right. Project management, which was a place where I spent the first part of my career is tough. It is very difficult to deliver on projects on time and in budget because there are so many factors outside of this.

I would say that between Blitz and K4 and Burnstone, Driefontein is a small project that would probably be sufficient for us to manage. I wouldn't like to see a whole lot more project implementation in that area. Having said that, let's acknowledge, and we've always been very open about this, that Blitz was started by the previous owners on a pre-feasibility level. I have started projects on pre-feasibility level.

And every single time, I'm being burnt. And that is the risk and the nature of doing a project off the wrong base. And sometimes, there are reasons why you take that risk. And Blitz is a good example of where that risk was taken because of the commodity trends we're seeing now.

And if they had not started it, and we had not continued with it, we would probably miss the palladium cycle. So you can make those choices. The Burnstone and K4 have been done of detailed feasibility study. So the base on which they're being implemented is a whole lot better.

And therefore, our confidence in being able to deliver on them is so much higher. And of course, project management is about making sure you've got enough capacity to manage these projects, and we've made sure the projects we've got. So it's unlikely we would introduce more projects in South Africa in terms of our growth strategy, especially in battery metals, there might be one or two, but of course, we will make sure that we have capacity and that they are done off a non-risk basis. In terms of your question on unit costs and inflation, we are seeing inflationary pressures.

And of course, we do whatever we can to work those out. And the one way I assess whether where we are doing the right things is are we doing better than our peers because we all face the same problems from a cost point of view. And we've been moving down the cost curves, a, due to synergies. I grant you that.

But also, there's been good cost control, and we have been able to show relatively stable cost profiles. We have been impacted by things like moving from a purchase of concentrate agreement to a cold treatment agreement, and that skews the numbers and may cause some of your concern. But generally speaking, I'm comfortable with the cost profiles within our business. But there is inflationary pressure.

It's hard to believe that CPI is what it is. The mining inflation definitely seems much higher, especially with imported equipment and that happens where we've got a lot of trackless or mechanized mining. So hopefully, I've answered your question. I can't give you exact answers on some of those things, but that's how we think about it.

Charl Keyter -- Chief Financial Officer

Yeah, Neal, I can also just maybe add. We are seeing higher sustained business capex, which is a carryover from 2020. So that will also come into that number. It is an unfortunate situation that we had to carry over from 2020.

And then, just bear in mind that we still have operations, albeit small, where we still carry a book like Grendel. So as you see higher prices, obviously, that has got an impact on that unit cost as well. But to Neal's point, inflationary pressures is steep. Eskom is not helping us with their recently announced increase.

So yeah, I think those are the high-level reasons for that increase.

Neal Froneman

Thanks for adding that.

Wade Napier -- Co-Chief Investment Officer

Great. Thanks a lot guys.

Operator

Thank you. The next question we have is from Tyler Broda from RBC. Tyler, you can go --

Tyler Broda -- RBC Capital Markets -- Analyst

Sorry about that. No, I'm here. I was just having trouble with my connection. Thanks very much for the call today.

Most of my questions have been answered. I guess just two quick ones. Just to confirm, I guess, is that, if you look at the capital allocation slide, the residual beyond the $40 billion -- ZAR 40 billion, sorry, that is being held for the various buckets, that in theory that could be put toward acquisitions. So in the ZAR 200 million or whatever the number would be at a spot price, is that delta sort of where we should be looking for acquisition firepower, I guess? And then maybe just secondly, I guess a more philosophical question.

The business at the moment PGMs in gold, you'll be potentially adding material gold, as well as batteries. Do you see any issue at all with sort of nullifying any premium in gold businesses if it gets co-mingled with the more pro cyclical batteries and PGM businesses? I guess, how do you look at the potential for gold equities to trade at a premium from a structural basis?

Neal Froneman

Yeah. Thanks, Tyler. And sorry, I was just writing down your question. Certainly, having cash reserves does give you the ability to use them when appropriate.

And one of our shareholders recently pointed out that if we had cash reserves as we went down into the COVID lockdown, we could have implemented a great share buyback program. So what I'm saying is cash reserves, whether they are there to cover debt and achieve an improved investment rating is one thing, but they are there to be used when we can see opportunities. So the simple answer is yes, that excess cash can be used for things like that. In terms of the gold premium, I think that's something that's disputable.

I don't think that as a gold company, we ever had a gold premium. And I don't think we ever lost the premium when we moved into PGMs. And I know I'm on thin ice because I also know how the North American analysts generally use a lower discount rate because it's gold. I must say I don't really understand why you do that.

But I'm not, in all my relationships with gold companies, whether they are listed on the TSX or the ASX or even in Johannesburg, have I recently seen a real premium to a gold company. So that's just my view and my experience. Having said that, I think your point about how do investors think about it because they like to diversify as opposed to companies is fine. I understand that need.

But I would also argue that we share more strategic thinking with our shareholders and the general market very openly, so that our shareholders can engage with us and share their views, which they do. And as long as they are supportive, we move forward. And we do have a supportive shareholder base to enter the battery metals. And the actual metals are not related.

Lithium and nickel and copper are not related to platinum, palladium and rhodium, as an example. But what is related is the intelligence that we have built up about these markets. And it's very complementary, both feeding to the same end users, and that's almost using some of your core competencies. And then I would argue that the combination of metals has commercial benefits in that if your investment thesis is about paying an industry leading dividend, and you can create less cyclical exposure to one commodity, your dividend should be more predictable and sustainable, and that's beneficial, and I think you'll get a recognition for that.

So it's really -- I suppose it's just different views, and we've chosen a path that is the one that I've explained, Tyler, which is different. I know to the way the pure gold companies think about it. But certainly, the ones we look at, we don't see these gold premiums. We -- but this is a matter of opinion.

Tyler Broda -- RBC Capital Markets -- Analyst

Great thanks very much for the answer there. Appreciate it. Thanks.

Operator

Thank you. The next question we have is from Stella Cridge from Barclays.

Stella Cridge -- Barclays -- Analyst

Hi there. Good afternoon, everybody, and thanks for the call. I wondered if I could ask about the comment on Slide 29, which discusses the de-leveraging achieved and then plans around debt. And so, you say that there's potential for consolidation of term debt in 2021, better interest rates.

And you referenced $500 million in refinance bonds. So I just wondered if I could clarify, does this mean you have the intention of calling both bonds in 2021 at the call date and potentially combining these maturities into one? And the second question is just in terms of your long-term outlook. Is your intention to stay in the debt market to kind of keep options open for the future, your referencing earlier your comments around potential future fundraising? Just wanted to get a sense of your thinking around that. That will be great.

Neal Froneman

Charl, do you want to answer that?

Charl Keyter -- Chief Financial Officer

Yeah. So I think the first thing to consider is, obviously, we had record low interest rates. At the time when we issued these two bonds was exactly on the day that the then mining Minister also made some pronouncements in terms of the mining charter. So I believe that our bonds was somewhat priced up in terms of what happened on the day.

So we really want to just take opportunity and look at the record low interest rate. So the plan is to collapse the two bonds into one. Currently, there is about $700 million outstanding and then to issue a single bond for about seven to eight years of about $500 million. So that is the thinking.

We really want to take advantage of lower interest rates. So yeah, happy with that. I just wanted to check the second part of your question.

Neal Froneman

Staying in the debt markets?

Charl Keyter -- Chief Financial Officer

Yeah. No, I mean, we always -- we will always keep our options open. We do believe that the debt market is good, and it's been good to Sibanye. And that's what I said as part of capital allocation, we need to have a steady hand.

I know we are seeing record high prices, but we have to take a forward-looking view as well and just make sure that our balance sheet is appropriately structured. So no, we will definitely look to the debt markets on a go-forward basis.

Neal Froneman

Thanks, Charl. Go ahead, Stella, if you've got something more.

Stella Cridge -- Barclays -- Analyst

No, no, I was just actually asking, do you plan to keep this target to keep 1 billion debt on average through the cycle. Where does that stand now?

Charl Keyter -- Chief Financial Officer

No, I think that's a comfort level for us. So that was almost a first hurdle. And if we do nothing, we would be happy for that number to stay at about $1 billion or ZAR 15 billion. However, if we are seeing these commodity prices and we believe that they will remain strong going forward, it would be prudent to start allocating some of that cash to debt.

We have said, we almost want to create a debt reserve to match what we have in terms of debt. So yeah, it would be prudent for us to continue looking at our debt. But as I said, in the absence of doing nothing, we're still comfortable with where the debt is currently sitting.

Neal Froneman

Thanks, Charl. And Stella, just to put on my accountant, we went through quite a long period of building up what I'll call a mature balance sheet. And it took a lot of hard work. And I don't think we just want to give it up.

I think it's smart to retain proper bond debt on your balance sheet. So just wanted to add that in. Thank you.

Stella Cridge -- Barclays -- Analyst

Many thanks, both.

Neal Froneman

Thank you, Stella.

Operator

Thank you. The next question we have is from Arnold Van Graan from Nedbank CIB.

Arnold Van Graan -- Nedbank CIB -- Analyst

Neal, thank you very much. I know it's late in the day, so I'll keep it brief. There's been a lot about your strategy in M&A. But there seems to be a clear focus now on organic growth and smaller M&A away from the big deals.

And again, you talked a lot about valuations, but is that driven by valuations? And I guess, ultimately, my question is, is it a big deal off the table? Or is that something you would still be keen on evaluations realign because I do get a sense that there has been a bit of a shift in your strategy? And then secondly, the initial question I had was, how did you get Blitz wrong from an operational perspective? Your metal price call was spot on. And you sort of alluded to that when you answered one of the other questions talking about the feasibility stage. But were there other operational red flags that you overlooked, given your strong view on the metal prices. And I ask this, given your M&A strategy and given that you are looking at other metals and other sectors.

Yeah, if you can just comment on the last one, and then the first one is just a question.

Neal Froneman

Yeah. Thanks, Arnold. And listen, we haven't really changed our strategy, to be clear, our M&A strategy. I think battery metals requires a different approach.

So that is smaller acquisitions and perhaps some of them slightly earlier stage. It also requires, in our view, being exposed to the supply chain. And therefore -- and because these are chemically complex issues, you need partners. So battery metals is a different strategy, M&A strategy to what we did in PGMs and what we would perhaps do in gold.

So I just wanted to clarify that point. Gold -- gold, our view is if it's not material, it's not -- that's probably not worth doing. So I'm not saying it is going to be a big target or it's going to be a small target, but it's got to be material. So just to -- if I came across as creating a different impression around M&A, it's only in the metals -- in the battery metal space, where I think we are talking smaller bite-sized chunk as we enter.

It's not our intention to become No. 1 in battery metals. That was our intention in PGMs because it only took four steps. Battery metals is a completely different kettle of fishes about quality, it's about location in markets.

And obviously, the quality of your products. So just wanted to say that. I hope that clarifies that point. In terms of, let's remember, it's a project we inherited, and we -- it was already being implemented of a pre-feasibility study, and we continued with that project.

And one of the first things we did is we redid the pre-feasibility study. But you've got to look at Blitz and see. We've had a number of challenges, which were related to some geotechnical issues, which put us on the back foot. Of course, the chain reaction in terms of having to focus in specific areas, which then created the ventilation constraint.

And we had further regulatory issues around that. And then, of course, we've had Covid, which we essentially had to stop all our projects. So there's been a whole lot of factors, which I think in a proper feasibility study, certainly, ventilation would have been better understood and the geotechnical issues would have been addressed as part of that -- as part of that study. So that was the nature of the beast.

I think what we've also learned is that the Blitz and the Stillwater ore bodies are quite variable and require significantly more mining flexibility to avoid dilution and grade issues. Therefore, we've upped our stay in business capital to ensure we've got flexibility. So those are almost more operational issues. But I do believe if more detailed feasibility study had been there, some of them would have come out of that sort of work.

So yeah, that's really it. Does it change the value of Blitz, not at all. It's still a great project. It's got very decent returns.

It is additional ounces. I know there are some perceptions that it's replacement ounces, it's not. If we could rewrite the -- or turn back time, we wouldn't have done it that way, but that's what we inherited. And we are now confident that what we've put in place is what we'll deliver on because we've done the work.

Thanks, Arnold.

Arnold Van Graan -- Nedbank CIB -- Analyst

Neal, thank you very much. That' very clear. Thanks a lot. Cheers

Neal Froneman

Alright. Cheers then.

Operator

Thank you. the last question we have is from Leroy Mnguni from HSBC.

Leroy Mnguni -- HSBC -- Analyst

Good afternoon, guys. Thanks for the opportunity. I'm quite interested in the Marikana reserve life of 16 years, excluding K4. And just trying to understand how much of that life sort of is under infrastructure? How much of it would require life extension capex because I was always under the impression that Rowland and Saffy, for example, need a bit of down to expansions and declines in that in order to sustain production beyond five years or so.

So if you can maybe give a bit of clarity around that or a bit of a breakdown on the different shafts, labs? And then the other question is on Slide 34, you talk about a 13% decline in rhodium supply -- primary supply over the next five years. But I look at all your reserve life of mine profile, then it looks like it's not coming from you. None of your peers are really signaling a decline in production. So maybe just an indication of where you see that rhodium supply coming out or which mines you think will close in the next five years? And then lastly, did you get all your rhodium from Anglo platinum, while they had their shutdown? Or did you sell some rhodium to them? And also, have you been getting all your rhodium from them post December as well, please?

Neal Froneman

OK. Sure, Leroy, you asked some questions that would be confidential. So that we may not be able to answer them, but let me suggest the following: can we offline give you all the information you want on the Marikana operations, the 16 years and what the capital requirements are and so on. Because it's a detailed answer that I think may not be of interest to everybody on the call, and we'd be happy to do that.

The 13% decline in rhodium supply, you would remember for -- well, in fact, one of the bases or the reasons for our entry into PGMs is -- and specifically related to platinum, was that we saw a declining supply profile because from the global financial crisis in 2008, there's been a lack of investment into the PGM sector. And we can't tell you exactly where it would come from. I think we've got a good idea, but it wouldn't be appropriate to put it out there. I think there's been like a lost side from certain operations, which because of the move in the commodity price, but that lack of investment will automatically lead to a dropoff of in supply.

And that's factored into the impact on rhodium, also remembering that there's a bias toward rhodium in UG2 reefs. So we don't -- you're right, it's not going to come from us, but from other producers. And it's a general PGM supply decline, which is going to exacerbate the increase in demand. I would prefer if we didn't answer your rhodium question because I think it's market-sensitive and relationship sensitive.

So I would prefer we didn't answer that on this call. I apologize, Leroy, but we'll get back to you on the 16 years and shaft for Marikana.

Leroy Mnguni -- HSBC -- Analyst

Thank you. I appreciate that. I think I'll reach out to James or offline to get some of the details.

Neal Froneman

Perfect. Thank you. And yeah, we will provide whatever you need. Thanks.

Alright. Operator, I understood that is the last question.

Operator

Yes, sir.

Neal Froneman

Alright.

James Wellsted -- Head of Investor Relations

Neal, Sorry, I've got one more from the webcast, if that's OK. The last one.

Neal Froneman

Alright. Go ahead.

James Wellsted -- Head of Investor Relations

OK. So this is from Steve Shepherd. Congratulations on an outstanding set of results. He would like to know about the keyway JV are and [Inaudible].

Can we share a bit of our thinking about this high-value shallow and vast UGT mining area. Given the high channel, this would probably be an opportunity for optimization. And I can imagine that you might be looking for capital projects at Marikana to improve your tax efficiency. Is that correct?

Neal Froneman

Yeah. Steve, thank you. Yeah. Listen, Pandora definitely features in our plans.

I would suggest again that because of its strategic nature, that we don't give you the exact guidance. But certainly, it's featured prominently in our plans, and you can work out the rest of that. Thank you.

James Wellsted -- Head of Investor Relations

That's all, Neal. Yeah, thank you.

Neal Froneman

Alright. Good. Listen, I know it's been a long session. And again, apologies for the webcast freezing.

As James said, the presentation and the webcast will be provided on our website in the form of the YouTube. And of course, we've put out very detailed notes in the presentation. Please feel free to contact any one of us should you have any specific questions. And again, thank you for your time.

We appreciate your support. Thank you very much.

Duration: 156 minutes

Call participants:

Neal Froneman

Charl Keyter -- Chief Financial Officer

James Wellsted -- Head of Investor Relations

Dominic O'Kane -- J.P.Morgan Cazenove -- Analyst

Dominic OKane -- J.P.Morgan Cazenove -- Analyst

Patrick Mann -- Bank of America Merrill Lynch -- Analyst

Wade Napier -- Co-Chief Investment Officer

Tyler Broda -- RBC Capital Markets -- Analyst

Stella Cridge -- Barclays -- Analyst

Arnold Van Graan -- Nedbank CIB -- Analyst

Leroy Mnguni -- HSBC -- Analyst

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