Sibanye Stillwater Limited (SSW) Earnings Call Transcript & Summary

Good afternoon. And good morning, ladies and gentlemen, and a very warm welcome to the Keliber lithium hydroxide project update. I'm very pleased to announce that the Board has approved the capital expenditure for this project. So effectively, it's all systems go. I'm sure you will enjoy the presentation today. There's lots of interesting information. As a team, we have developed our knowledge of the European ecosystem and our Chief Regional Officer for Europe, Mika Seitovirta will provide you with more detail on it. If we can just move to the next slide. Of course, there are forward-looking statements. We're talking about future capital expenditure. We are talking about future production numbers. We are talking about markets that are subject to change. So please take note of the safe harbor statement. Next slide, please. So I'll do a brief introduction just linking the Keliber project to our group strategy. So let's move on to the next slide, please. But first of all, just to get your attention, we thought that it was appropriate just to pick out the highlights of what we're going to discuss today. And if you finish this presentation and refer back to the slide, I would suggest these are the key messages that you should walk away with. First of all, we've made good progress in building our portfolio of green metals and energy solutions. I will show where that fits into our strategy shortly. We have increased our shareholding in Keliber to 85%. We've done that in a very smart and value-accretive way, and we are now the majority shareholder. This exposure is clearly to a high-quality Keliber lithium hydroxide project, which I also want you to remember is very scalable. And although we are really talking about the first phase of this project, please remember that this is really just the beginning, and it is very substantially scalable. It's in a favorable location, and we believe that it's an opportune time in the cycle when we've made our entry points. I will talk more about ecosystems, but this is a project that establishes us very firmly in the European regional ecosystem. And we've made 3 significant investments in the system. The one is Keliber, the other 1 is Sandouville and the Verkor Giga factory investment, those are all part of the European ecosystem. This is a world-class project and it's in a superior location. It's a lithium hydroxide project. It's close to the critical end users. It will deliver 15,000 tonnes per annum once at steady state. As I've said, it's lithium hydroxide into the European battery ecosystem. The first phase or the initial life of mine is 16 years. We've got a lithium resource of 17 million tonnes at a grade of just over 1% and again, I'm going to repeat myself by saying this is in a highly prospective region, a destination in the world where Finland is regarded as a top-10 investment or mining destination. Very significant robust project economics at a lithium hydroxide long-term price of [ $26,000 ]. The net present value is EUR 887 million and that's at a discount rate of 8%, giving an IRR of 20%. When we look at long-term prices and where they'll settle out, in our view, it's probably closer to $37,000 per tonne. The net present value of this project is EUR 1.72 billion, also an 8% discount rate and the IRR goes up to 27%. Obviously, you will make your own choice of what you believe the long-term price of lithium hydroxide is. It's a supportive environment. I don't think there's anyone that questions the [ inroads ] that battery electric vehicles will make. It's been driven by legislation. Lithium is an essential part of our batteries, and we see it having a long-term [ underpin ]. We see significant constraints in supply. And therefore, we should see elevated lithium prices for the significant future. As always, we consider the impact on stakeholders. And this has positive benefits for all stakeholders. It's a substantial investment into industries that have been identified by the Finnish state as strategic important. That's the first and probably the greenest integrated battery metals project in Europe. And you will see the Keliber team will demonstrate what low-carbon footprint that this project has and especially being close to the market obviously, that's got benefits as well. It does have important benefit from a fiscus point of view for regional stakeholders, local employment and procurement for the region is important considerations. And then as you would expect, biodiversity studies have been conducted in-depth and have been very carefully considered in the development of the project, and these will be discussed by the Keliber team. So this is a strategically important project for both Finland and the European battery sector, and we're very pleased the Sibanye-Stillwater to be the catalyst in making this project happen, thanks. And if we can go to the next slide. I'm not going to go through our 3-dimensional strategy in detail. You should be familiar with this. You should remember that what underpins this strategy is our analysis of what we call the [ gray elephants ]. And essentially, we have a strategic foundation, which is a foundation we established many years ago. We have our strategic essentials, which is about being good at operating; and then, of course, in terms of our green metals, what is going to differentiate us in this market. The 2 areas under strategic differentiators that will become apparent in this presentation is, first of all, the one highlighted: being a unique -- building a unique global portfolio of green metals and energy solutions that reverse climate change. I think that is obvious that this is a further development of our strategy, progress has been made. And then the one that is more subtle is the one that we have included in the bottom is: we are instrumental in building pandemic-resilient ecosystems. And you would remember that we chose to participate in the North American and the European ecosystems as a way of ensuring that we are more pandemic-resilient and working with like-minded people in those regions and have a similar understanding of pandemics and the way they deal with it. So that will all become apparent as we work through the Keliber project and how it is situated with regard to those 2 aspects. Thank you, [ Henrik ]. Just again, a reminder of the journey we've been on, we started predominantly as a gold company. And that base is still a very important base for the company. And when we start talking of green metals, DRDGOLD through its tailings retreatment business produces some of the greenest gold in the world. We then made an entry in 2016 after very careful planning and considerations into the PGM sector with the acquisition of Aquarius and Rustenburg and then eventually Lonmin in 2019. Importantly, the acquisition of Stillwater, which internationalized our business was also a very important milestone, took place in 2017. And the PGMs form the first base, if I could call it, of green metals as well. Of course, PGM recycling was a significant consideration in the acquisition of Stillwater and of course, has become more relevant with the considerations given to the [indiscernible] economy. Back in 2017, 2018, we started planning to enter into the battery metals segment because we recognize that battery electric vehicles were going to make a significant impact on the global [ carpool ]. And you would remember that the first step in that was actually acquiring SFA Oxford to assist us with understanding the battery market and the chemistries related to batteries. And we acquired that business and SFA Oxford, as you would have seen through more recent presentations to the market on the battery sector have developed a very good understanding of this market, and they have obviously provided us with guidance. I want to point out at this stage that there are [ Chinese Walls ] between the work that they do and the work that we do. And we don't always agree with what they do, but they do very good work, and we include some of our own estimates in our planning, which is sometimes different to some of their assumptions and estimates. But then in very quick succession, we acquired the Keliber lithium hydroxide project in 2021; Sandouville; we made our investment into Rhyolite Ridge and into New Century for its tailings retreatment business. And that brings a spectrum of metals that are battery metals, and when you combine that with the PGMs and the green gold that we produced, starts creating a portfolio of green metals, which we want to expand on. We are very mindful, as you can see in the [ strapline ], our value creation benefits all stakeholders in multiple jurisdictions. Thanks, [ Henrik ]. As I said in our strategic differentiators, we have chosen to focus in 2 ecosystems that are relevant from a battery point of view, and that is Europe and North America. And today, we'll really focus on Europe. And Mika and his team will give you a very good idea of the understanding that we have developed in this ecosystem in Europe. And certainly, I think it's becoming our competitive edge, and as we make entries into other sectors of this ecosystem is obviously underpinned by this knowledge. Thank you, next slide. So I just want to talk a little bit about increasing our shareholding in Keliber and securing the project funding. As I said right at the beginning of the presentation, the Board has approved the capital expenditure. So I want to start with that's been a phased investment. As you saw, we made our first investment in 2019, where we acquired a 30% stake for EUR 30 million. We had a right to increase our shareholding to [ 50% plus 1 ]. And that was for a cash consideration through a rights issue of EUR 146 million. Now [indiscernible] that EUR 146 million already sits on the balance sheet of Keliber, which means that the initial project funding is already in place. We then did a concurrent voluntary cash offer to minorities. That cost us EUR 190 million, and that took our shareholding up to just under 85%. And it took the number of shareholders in Keliber down from 114 to 10. Very important, and we are very pleased that the Finnish Minerals Group, which is really the [ state ] has retained a 14% shareholding, and they have the opportunity to increase that back to 20% with future capital raising. We have updated from the feasibility study, we've updated the project capital taking into account recent inflationary pressures. We have done further work in terms of the definitive estimate. We've -- and that's increased the project capital to EUR 588 million. And that will be funded through equity and debt. So remember, we have the EUR 146 million of equity already in the company. We are looking to raise a minimum of EUR 250 million in debt. And of course, the balance would be in equity and to take that up to about EUR 500 million. Remember that the EUR 588 million includes contingencies and other things. We would probably have to raise another EUR 104 million in equity, which will be done through a rights issue. And of course, the Finnish Minerals Group has the right to pull that back. But that would come somewhere down the project. None of that is onerous. I want to, at this point, make the point that our capital allocation framework will be adhered to. This does not affect issues such as buybacks, dividend payments, that's all planned and scheduled into our cash flows over the next few years. This is really not onerous funding. And as I've said, EUR 146 million is already on the Keliber balance sheet to kickstart this project. Thank you, [ Henrik ]. And with that, let me hand over to Mika, the Chief Regional Officer for Europe. Thanks, Mika.

Thank you, Neal. Good morning and good afternoon, everybody. Thank you for joining today. This year, we have been working a lot with our group strategy, including the battery materials, [ pre-metals ] and related energy solutions. On top of that, we have been working hard and intensively on our European regional strategy. As part of that work, we can already conclude that we have different building blocks in our European strategy. First of them is the virgin battery metals and products. The second building block is the recycled battery metals and products and the third one is the recycled PGM metals. This 3-block strategy is very important for us because we have done a lot of work to understand the market, how it is going to develop. And secondly, what are the opportunities for Sibanye-Stillwater in Europe to grow. This strategy was approved by the Sibanye-Stillwater Board in May this year. As you heard already in June, we started to take the first concrete steps to go forward and deliver that strategy. It is important to understand that in Europe, our clear view is that European customers would like to have European suppliers already today. And this is not only because of China being far away or because of the geopolitical situation in Europe. But this is also for CO2 [ reasons ] nowadays. If we look at the forecast, how the electric vehicles are going to grow up to the [ 2030 ], we can clearly see that there is a serious deficit when it comes to lithium hydroxide in the market in general, but especially when it comes to the European landscape. Could I have the next slide, please. Thank you. Today, it's about Keliber and it's about lithium. We have reviewed as part of the strategy work, all the disclosed European lithium projects. And it's clear that the challenge in many ways is its permitting or its finding. And there are close to 20 different projects currently in Europe. We have a good track record in permitting. We have the funding base, and we do believe that we can ramp up the production 2025. And when we start ramping up the production, we are clearly in a [ pole ] position to enter the European market. This will give us a lot of opportunities. This will give us the scalability of our current project and it also means that we can control our process because we have the first vertical lithium hydroxide project in Europe. What does it mean? It means that we can control the quality. We can control the cost, and we can control the carbon footprint. And it goes without saying that if the product is only traveling from Finland to Continental Europe, of course, the footprint is much lower than when it travels from somewhere else. Next, please. We have also studied the ecosystems here. And in Europe, the ecosystems are that we focus mostly in France and in Finland, let's say, around Scandinavia and in France. Why is this? This is really because we believe that these governments have been very clear in disclosing that they want to have the control over the critical metals. So they are really supporting in order to create the battery ecosystems that are needed in Europe. So we have a strong position here, and it's not only Keliber. It's also, of course, Sandouville and Verkor as mentioned earlier. This, together with the fact that we have the logistics benefit, we have a green benefit because of the energy, the less traveling and on top of that, we have also benefits -- business benefits to customers -- potential customers because we are not putting the same kind of working capital demands because we can deliver on time and cut the lead times of a normal lithium hydroxide delivery. I would also like to add once more that we are on top of all these competitive advantages, we are a European project. And that is based on our potential candidate discussions that is a very much appreciated fact. Next, please. Now let me take you through a couple of key figures and numbers of the project. As mentioned, these are updated now in October. So these numbers are updated because we have done more detailed engineering. They have been also updated because these are post-war numbers in Europe, which means that the inflation is now included. 15,000 tonnes and 16 years life of mine. We also want to highlight that we haven't done any offtake yet. And I think this is a great benefit for the project because we are not doing this through traditional project financing, which would then demand that we would have those offtakes in place. We have a lot of interest. We have a lot of potential candidates as customers, a lot of potential partnerships that we could do, but we haven't committed as yet to those. It will be about 300 employees. Obviously, in the construction phase, it's much more. It's probably close to 500. And if you look at our reserves, 12.7 million tonnes; resources, 17 million tonnes, and [indiscernible] we think is a conservative pricing of [ $26,000 ], which we have been using in our financial model based on Wood Mackenzie's forecast. So it gives a nice 20% IRR. And if we would go for some other forecast, as mentioned like the SFA Oxford forecast, so it would then be 27%, respectively, NPV EUR 887 million against EUR 1.7 billion. The total updated CapEx is EUR 588 million with an average operating cost EUR 6,751. And this operating cost is also updated with inflation. Next, please. Just to take you through the map again. And we are on the West Coast of Finland. And this area is called Central Ostrobothnia. And that is a home to some of the most significant lithium deposits in Europe. In the smaller map, you can see that there is the port, there's the Kokkola city, where the port is and then there is a place called Kaustinen. And in this area where the -- it's about 60-plus kilometers from Kaustinen to Kokkola. So the refinery, the lithium hydroxide refinery is going to be located in the Kokkola industrial park and the deposits are very much close to the region of Kaustinen and [ Kronoby ], you can see the locations there. So it's only 60-plus kilometers to take material with the truck to the refinery. And then the port is right away there, and it's a 2-day journey to Continental Europe and the customer will have the product. Next, please. A couple of words about Finland. First of all, I think it's important to know that we were one of the first countries to make a national battery strategy, if not the first, to be honest. And that was very comprehensive and our partner is Finnish Minerals Group. Our co-investor has actually been the catalyzer and the vehicle to create this battery strategy for Finland. So it has been done in a very good way, and they have several [indiscernible] to initiate projects to find investors, strategic investors, who can not only fund projects but also to contribute to the projects. So clearly, it's very synergetic our work with our partner, FMG. You can also see that if you take an investment attractiveness index, you can see that Finland is ranked as #1. This is the latest that Frazer institute has done, however, it's still a pre-war ranking, which some of you might notice here. Next, please. And then before giving to Hannu Hautala, Hannu is the CEO of Keliber and the head of the project. And Hannu has a very strong and international background in metals, mining and in related businesses. And Hannu has also done a lot of big investment projects in the past. And I have a good connection with Hannu because we have been working together at older company during my older times. So with these words, over to you, Hannu, please.

Thank you, Mika. Ladies and gentlemen, also from my side, good afternoon, good morning. On the coming slides, I will tell you a couple of [ works ] about permitting status and about life of mine. Then we will move to the CapEx and start of the [ projector ] with the Kokkola investment first and then coming to concentrator part. And then I will also tell about ore potential, which we consider to be substantial at the Central Ostrobothnian region, very close to our first mine, [indiscernible]. So this slide shows about the status of the environmental permitting. And before going into the details, couple of background information for your benefit. First of all, the first ore -- first lithium ore or spodumene ore was found in Kaustinen region in 1959 already. So it is 70 years ago, almost. And secondly, Keliber as a company was established 20 years ago. And thirdly, during the first 18 years of Keliber life, Keliber has spent for permitting and exploration and technology development, et cetera, approximately EUR 40 million. And during the last -- during the previous almost 2 years, 1 year and 10 months, Keliber has spent another EUR 40 million for permitting for definitive feasibility study for exploration work, for basic engineering and even for detailed engineering and preparing contracts to source and to procure alternated technologies and construction works, which are now in front of us. Turn to the left side of picture or template, 4 important elements of Keliber growth. First of all, Syväjärvi mine; secondly, Rapasaari mine; thirdly, concentrator; and number four is the refinery. Syväjärvi mine is fully-permitted and the environmental permit is legally valid since July 2021. And then to the right corner, Kokkola lithium hydroxide refinery is fully permitted and the environmental permit is legally valid since August of this year. So those 2 in terms of environmental permitting they are done. In the middle, there is a Rapasaari mine; and there is important element, concentrator. They are physical -- geographically very close to each other. And the -- well, for those 2, the permit decision-making is ongoing at the authority. And I'm having the solid information that authority is seriously working allocating resources for the permit preparation and decision-making. About 2 weeks ago, we have received that 200-pages draft that -- which is the basis for the decision. And earlier today morning, we received an information that the authority would grant or is targeting to grant the permit decision still in this calendar year. This is, of course, not the guarantee, but it is a strong desire by the authority that they are granting to permit still in December. To highlight from the past is that, for example, for Kokkola lithium hydroxide refinery, the permit was granted like you see on the green second box from the bottom, permit was received, granted in June 2022. And then in August 2022, the permit reached the legal validity. It means that nobody appealed against the authority decision to grant the permits for [indiscernible]. Then further important permits are construction permits, all needed construction permits are already legally valid. So there is no obstacle to start to building from that angle and before that the [indiscernible] was prepared for concentrator and construction side. And nobody appealed against [indiscernible] of the concentrator, nobody appealed against building permits. Those are, of course, not a guarantee, not to see [indiscernible] against, for example, Rapasaari mine or Päiväneva concentrator. In the case of appeal, appeal treatment and handling may take some 6 to 36 months, and we are prepared for that. Next slide, [indiscernible] faster. So we have about indicative production times. First of all, we have 2 main mine locations and three so-called satellite locations. Syväjärvi, open pit mine will be the first one that we have ore for almost 4 years and then comes Rapasaari mine and we have ore for approximately 8 years. So altogether, 12 years ore in the [ 2 first ] locations. And we continue now exploration and drilling in between Syväjärvi and Rapasaari. And it means that most likely the satellite locations, which are in the bottom left in the template, Emmes, Outovesi and Länttä they probably will be pushed into the future on the line -- timeline of the life of mine. Next slide, please. Here a couple of numbers about the capital expenditure. It was already discussed by Mika Seitovirta earlier. The total CapEx for the coming 3 years is EUR 588 million after that in coming 16 years, the sustaining CapEx is EUR 138 million approximately, this is the estimate. On the left [indiscernible] diagram, in the first year, almost EUR 250 million will be invested, and in the second year close to EUR 300 million and #3, which starts to be then to ramp up year already when we start the equipment than the CapEx [ EUR 90 million ]. The next slide, please. Then to the exploration work, which really is highly interesting and promising and like said by Neal Froneman, [indiscernible] most likely is a scalable, easy to scale. We have learned to build second lithium hydroxide refinery, and we have places -- locations where we continue exploration with the target to increase our ore reserves. Currently, like I said earlier, we have 12.7 million tonnes ore. Finnish National Geological survey assumes and estimates that the total ore potential is 100 million tonnes or more. This estimation is based on statistical methods, not on drilling, through drilling where we need to show and prove that it really, really is the case. During the 20 years of life of Keliber, we have protected the areas around Syväjärvi and Rapasaari and [indiscernible] and even more because now when we come more into the discussions, then many exploration companies and early phase companies also start to get interested in Kaustinen region. And we are well prepared before that already during 20 years. Currently, we have to reach into the depth of 200 meters in a maximum. So in practical terms, we have scratched the surface. Only 2 weeks ago, we drill the first 500 meters hole, and we continue to intensify our exploration drilling. In the past 5, 6 years, we have invested EUR 1 million per year on exploration. In coming years, we plan to increase that towards EUR 5 million, EUR 6 million per year. Of course, it needs to be budgeted year-by-year, and we need to justify the investment with the good results of exploration, but the plan is to substantially intensify and take the total benefit out of the 100 million -- 100-plus-million tonnes potential according to Geological Survey of Finland. Next slide, please. As you saw a couple of slides ago, Kokkola lithium hydroxide refinery is fully permitted, and we also have building permit and [ those both ] are legally valid. So we now start to construct the Kokkola lithium hydroxide refinery preparative tasks like putting all construction site infrastructure in place. We will start in December this year and during first quarter next year, the proper foundation work and [indiscernible] construction, et cetera, will be start. Next slide, please. So this slide shows the integrated production process, which is unique at least in Europe and rather rare also in the world [ market ]. So starting from the own lithium mine, and then going through the concentrator processing, then only 66 kilometers transportation, and it is good to -- 66 kilometer approximately, it is good to keep [ on the ] mine because soon we will come back to other transportation routes. So truck transportation from the concentrator to the lithium hydroxide refinery. There first comes the high-temperature conversion where we will use LNG, [ liquidized ] natural gas, as a fuel. After that comes soda pressure leaching technology and final [ crystallization ] and then packaging of battery-grade lithium hydroxide. We have selected Metso Outotec and FLSmidth as a partner because they are world-leading companies in hydrometallurgy and in [indiscernible] processes like [indiscernible]. All technologies except soda pressure leaching are well established, well in use. Soda pressure leaching offer substantial benefits in the form of site streams, which our neutral site streams, which we can or our partners can use as a construction material without any additional treatment. This is not the case at our peers, who are using [ acid roasting ] technology. Soda pressure leaching technology has been piloted in a demonstration factory [indiscernible] 2 times by [indiscernible] in a continuous process 2, 3 weeks long. And in both of those, we have produced battery-grade lithium hydroxide and the product has been very fine with external parties and the purity of the product has been confirmed. Technology supply of Metso Outotec has piloted the same process for [ their ] other customers a number of times, more than 5 times. And Metso Outotec has sold the technology to 2 of our peer, one is [indiscernible], and the other one -- other name has also been published. Next slide, please. Then I would like to go to the ESG topic briefly and to biodiversity, which are very important for Keliber. I think they are important for many mining and metals companies. [indiscernible], work study, which was prepared for Keliber by Wood Mackenzie consultant and analysis company for metals and mining and energy. This picture shows CO2 emissions according to the Scope 1 and Scope 2 from 6 or 7 different production routes. Some of those production routes are already in operation, some like the #7 Keliber is not yet. So Keliber numbers in this picture are based on basic engineering, which is sufficient enough to give a reasonably comparable figures. Let's have a look on the main lithium route, which starts from Western Australia. Ore is typically extracted there, then [indiscernible] and concentrated and then the [ 6% ] spodumene concentrate typically travels to the north to China and Chinese companies are operating refineries and once the lithium hydroxide travels from China to selected base point or the selected delivery address, Port of Rotterdam, total Scope 1, Scope 2 CO2 emission -- CO2 equivalent emission is at the ballpark of 16 tonnes CO2 per metric ton of lithium hydroxide or lithium carbonate. In case of Keliber, the comparable number is 4.38 tonnes of CO2, Scope 1, Scope 2. Biggest reasons behind of the difference is, first of all, LNG, liquidized natural gas, was a selected Keliber fuel as a high temperature calcination process -- first process part at the lithium refinery. Second element and a reason for the difference is the Finnish electricity mix. You'll see on the right side of the slide, share of CO2-neutral electricity in Finland was 87% in 2021. So this is the Scope 2 emissions. In Australia, China, the CO -- the electricity, which is based on the [indiscernible] source is approximately 80% to 90%. So 80% to 90% in Australia, China. 13% [indiscernible] based electricity in Finland. This is a substantial difference. And then as a third one, comes the transportation route. Once the ore has left Western Australia, traveled to China and from China to Rotterdam, then the total journey is approximately 29,000, 30,000 kilometers. And now I'll come back to Kaustinen, Kokkola, 66 kilometers and then approximately 2,000 kilometers to the Central European [indiscernible] like Rotterdam. We will continue our work with CO2 emissions towards 0. Next slide, then impact on the flora and fauna environment and next to us, we have prepared a number of environmental impact assessments as part of our environmental permitting process. Those have been all reviewed and approved to fulfill the legal requirements by the monitoring authority. And based on the recent conclusion from the monitoring authority, we have submitted our environmental permit applications to permitting authority in Finland. There are 2 different organization, independent from each other. One is granting the permit and the other one is doing the monitoring and control task. We take care of animals. Golden eagle, moor frogs, otters, and flying squirrels are close to us. However, they are not preventing our mining operation. In cooperation with the biologists, we have, for example, found a new home, a better place to live for the golden eagle in the [indiscernible]. He is doing well there. Next slide, please. It is obviously a slide with a lot of information. I think a couple of things, a bit of repeating. First of all, 300 [indiscernible] mines will be at the end of life peat production field. Peat is [indiscernible] energy source, utilized in Scandinavian countries. Finland has decided to stop peat burning in coming 15 years and to utilize peat production field as a lithium production places an excellent opportunity to offer [indiscernible] for those people who otherwise would lose [indiscernible] of peat production. And then from the bottom slide screen, the most important one, analcime sand will be used as a construction material at the Port of Kokkola at the harbor expansion. Also, it will be used as a raw material for concrete at the local concrete factory. I think now it is time to hand over to Neal Froneman.

Thank you, Hannu. I'm just waiting for the camera to change. Apologies for that. Yes, thanks, Hannu, and Mika. And certainly, from our point of view, a very exciting project. In terms of the lithium market outlook, the first thing I want to say is we are not experts in this area. And I'm on the public record as having said that, I believe battery electric vehicle penetration rates are overstated. And in fact, if we look at this slide, you can see how analysts have adjusted the estimates of the penetration rates of battery electric vehicles literally every quarter. I think what it's safe to say is that the penetration rates will be significant. This is not a [ fad ]. This is being regulated, and it is happening. But I do believe that some of these penetration rates are overstated. And I wanted to assure listeners on this call that we are not planning our entry into the segment based on some of these numbers. We have a much more conservative view. But some other things to note, is that battery electric vehicle production appears to be weathering the global economic slowdown better than internal combustion engine vehicle production, although we have seen a slight kick up more recently on the internal combustion engine vehicles. So that bodes well for the future. I think there's been some additional changes more recently such as the Inflation Reduction Act in North America. That's created a little bit of a push up and then, of course, the EU ratification of 2035 0-emission targets has had an impact. But of course, global economic downturn and those type of things, inflation are having a bigger impact on Western Europe and China. Nevertheless, despite our more conservative views this is still an attractive segment to be part of. So let's move on to the next slide. And again, the trends are important more so than the absolute numbers. And I referred to the very good work and the very good understanding that SFA has developed in these areas. And what you can see is very significant deficits developing over the next few years. Now where we may have a different opinion is in terms of the assumptions of the projects that are going to be probable versus those that are possible. We, as miners, know the difficulty of bringing supply into production. And I think even with lower penetration rates of battery electric vehicles, there will be less supply. So the overall picture should not be too different to this. And as I said at the beginning of the presentation, you will make your own call on what you view as the long-term price of lithium hydroxide. But we are bringing a project into production in an environment where penetration rates will be significant and deficits of lithium will also be significant. That's a good place to be. Next slide, please. So I'm going to bring the formal part of the presentation to an end with a brief conclusion, and then we'll open up for question and answers. The takeaways from this presentation should really be the following: the Keliber lithium hydroxide project has been approved by the Sibanye-Stillwater Board, which means we are authorized to spend the capital. And as you heard from Mika and Hannu, we will start by building the lithium Kokkola refinery. We are progressing our European battery metal strategy through this investment. We also tried to demonstrate that this is a very good value entry point and this [indiscernible] value for all stakeholders. This is a high-quality integrated lithium project. It is very well positioned to supply lithium hydroxide into the growing European battery ecosystem, and it is scalable. The project economics are robust at conservative lithium prices. Of course, it's at what we think will be long-term prices. This is a really good project from an economic point of view. I've already mentioned that the Kokkola lithium hydroxide refinery will commence, and you heard Hannu talking about starting that in December. We have a positive outlook for the lithium market, as I just mentioned on the previous 2 slides. And again, I want to just highlight that both the primary production is scalable, and so is the refining capacity, which makes this a project that can adapt to conditions as we see them evolving in Europe. So thank you for that. The strapline at the bottom is important. This is a unique valuable and integrated lithium hydroxide project. So thanks for that, and James, over to you.

Thanks, Neal. I do have a couple of questions from the webcast. The first is from [ Phoenix ] at Bloomberg. He is asking if we could give an indication of likely customers that we are engaging with to purchase the lithium. Are there plans to lock in long-term contracts?

Yes. So Phoenix, hi. Those customers are listed on Slide 10. So I'm not going to go through those. We have, with the Keliber project, decided to keep our options open and not into long-term projects. That is unique to the Keliber project. You would note that in North America, with the Rhyolite Ridge project, we did enter into some long-term contracts for different regions. But for Keliber, certainly, we have no intention of entering into long-term contracts at this stage. Thanks, James.

Thanks, Neal. The next one is from [indiscernible] at Umthombo Wealth. Two parts to the question. The first part is, is Sibanye still looking to acquire assets in the battery metal segment? And then can you also please provide guidance on production of refined nickel at Sandouville and the unit cost -- cash cost per tonne? I guess that's probably for Mika.

Yes. So Mika, if you can just get ready to answer the second part of that question. The first part of that question, we have 2 really good projects in Keliber and Rhyolite Ridge. And certainly, I think those will put us solidly on the map. We continue to look at alternative projects. We continue to look at opportunities, but we are very value disciplined and unless we can do that in a value-accretive way we won't do it. But yes, we would like to still grow our battery metals portfolio within the regions that I highlighted right at the beginning of the presentation. Mika, over to you on the Sandouville costs.

Thanks, Neal. And thank you for the question. Indeed, if you look at the Q3 numbers, so you can see that the cash cost per tonne has increased a lot. And it is because we lost production volume due to losing 1 electrolyzer in the production in July that impacted July production and also beginning of August. What we have done this year is actually that we have done a full maintenance CapEx investment agenda. And we have also done a lot of work to create an agenda for the debottlenecking of the production. So all these investments are going to be done during next year, most of them, at least. And that means that we can stabilize the production and through that, we can grow because the nameplate is 16,000 tonnes as we know. We thought that we would have been able to grow this year as well, but because of that technical problem, so we didn't reach that target yet.

And the next question is from Abhishek at the PRC. Given that the mine, the refinery and the port are close to the Arctic Circle, what challenges do you anticipate? And what are the potential mitigants that management has put in place, especially with regards to operating in the winter season?

Yes. Thanks James. Abhishek, hi. It's a question we've had detailed discussions around, but we are not experts as South African in working in cold area. So let me hand that one over to Hannu, who obviously knows that environment well, and this has been well considered. Hannu, if you could please answer that.

Thanks, Neal. Thanks, James. Yes, we continue as normal. Finland has a strong and solid infrastructure road, electricity, ship transportation, et cetera. Everything is working 365 days, 24 hours in a day. Temperatures in this region where I'm now can drop down to -35 degrees centigrade. We have 320-kilometer south from the Arctic Circle, a little bit north from the Arctic Circle already. Today, the continuous night has started. It stays there some 3, 4 months. So only what we need, extraordinary, in wintertime is more light, more lamps at the construction sites and at the mining. Otherwise, everything works like normal. We tried with normal cost with 100 kilometers an hour -- and our trucks drive 85 kilometers per hour with 60, 70 tonnes of total load.

This question is from Patrick Mann at Bank of America. Can you explain the Finnish Minerals Group clawback right to go up to 20%? When can they exercise this and at what price will value?

Yes. Mika, do you want to pick that one?

Yes, Neal. Thank you. Thanks, Patrick, for the question. As you know, we have had our first right issue, which was already completed, and we will have the second one where the window is going to end in the beginning of the year. And they have this opportunity, which we have agreed between the 2 companies that if you wish to go back to 20%, so it's doable. However, as far as today, we know so FMG has not yet done the final decision, but it's an opportunity that they have. And obviously, the rights issue is done with the same valuation, what we just went through during the first rights issue.

Thanks, Mika. That's the last question on the webcast. So maybe we can go to the phone lines.

[Operator Instructions] We have a question from Raj Ray of BMO Capital Markets.

A couple of questions, first on the permitting and then on the cost and CapEx. So on the permitting, I think one of the comments that was made was, there was the potential for 6 to 36 months delay in case of an appeal. But just wanted to ask, has there been any challenges so far with respect to the ongoing permits for the mine and the concentrator?

Raj, there have been no challenges, and therefore, we remain, let's say, highly confident that with the outstanding permits that is most likely the outcome that we expect. I think what we highlighted and as you've said it, if there is a challenge, then there could be a delay of the -- those mines and concentrators up to 36 months. But as I think we're just being very transparent. Our view is, it's highly unlikely. Mika, do you want to confirm that?

Thanks, Neal. Yes, I think we have a good track record. And if you look at backwards, so we have the permits so far. And for instance, for the lithium hydroxide refinery, there were no appeals. But there can be appeals and there can be appeals which are serious, which are not serious. We have a good cooperation not only with the authorities, but also with the locals there. And yes, I can only confirm what Neal just said so. So we believe that we are going to get permits by the end of the year end. And this is what the authorities have told us more.

And then moving over to the CapEx. Neal, so the updated CapEx number is EUR 588 million. And just wanted to get a sense of how you're looking to fund in respect to the split between debt and equity? And then the remaining EUR 104 million on equity side, that was based on the EUR 475 million, if I'm not wrong, right? So with updated CapEx, that equity number might be slightly higher.

Yes. Raj, you're spot on, and the numbers we provided are consistent with, let's call it, the EUR 500 million CapEx number. We will make a call closer to the time exactly what that debt equity split would be. When I went through those numbers, I tried to portray, it's not an onerous difference or funding requirements. We would want probably a minimum of EUR 250 million debt, which means then that EUR 104 million would be -- of equity would be a higher number, but we might push the debt to, say, EUR 300 million, which means that the equity portion would probably be EUR 50 million more than EUR 104 million. So we haven't quite decided, but certainly, we have substantial debt leverage and part of keeping our options open on not getting into off-take agreements is by using our equity in a smart way. So that decisions we'll make down the line, but the way you've analyzed it is correct. But I would say for any modeling, I would use a minimum of EUR 250 million of debt in the balance equity.

Okay. And one last question on your operating costs. So the updated number of 600 -- sorry, EUR 6,750 a tonne, so that's an increase from the previous number of EUR 4,200. I mean look, the margin is still pretty significant. But just wanted to get a sense of what's driving that increase? What were the key drivers for that increase from EUR 4,200 to EUR 6,750?

Yes. So of course, I think Mika made the point and Mika and Hannu you should come in at that the previous numbers were pre-Russia -- the Russian war -- the invasion in the Ukraine. And obviously, we've seen very significant inflationary pressure. And we've just brought the estimates up to date, but Mika or Hannu -- if you want to pass it on Mika to Hannu, you can just provide the detail there, please?

Hannu, you would provide a little bit more detail, but the major part is obviously inflation. Yes. So Hannu, please.

Yes. This is the case. And of course, energy has inflated substantially talking about electricity and LNG, for example, both increased cost elements into the economical model. And we have also built a bit of buffer there.

We have no further questions on the conference call.

I'll just check quickly, and no more questions on the webcast -- from the webcast either, Neal, so I think we can wrap it up.

No. Great. Thanks, James, and thank you, everybody that attended, and those of you that answered questions, we appreciate it. This is a great project, and I think the strapline on the last slide was really the key issue. It's a unique, scalable, high-quality lithium hydroxide project well placed to service the battery European markets. We're excited by it, and we're going to start building it. So thank you for your time, and it's much appreciated.