Good afternoon and good morning to our international investors. Welcome to our 2nd Investor Day and as you can see, it's our PGM Investor Day. First of all, like all our presentations, please take note of the Safe Harbor statement. They are forward looking statements and I'm not going to ask you to read this like Richard did last time. All right.
Today, I will again be assisted by a number of executives and senior managers of our organization. And as you know, I rate the importance of people and specifically our people very, very highly. And today, you will again get significant exposure to both the competence and the depth of management within our organization. I'm pleased to kick start the session with a brief introduction on our PGM journey. So let's have a look at that on the next slide.
So just a bit of a refresh. To me, it's always important to remember where you've come from. And in 2014, we announced our intention to enter the PGM business based on the fact that the our core competency at that time being medium and deep level underground mining and of course rock breaking was very similar in the PGM business. Of course, you cannot move into another commodity unless you fully understand the fundamentals related to the supply and demand of that particular commodity. So we conducted a very thorough and detailed analysis of the PGM market and of course, fundamentals that underpin the PGMs, which led us to developing a leading PGM business at a low point in the cycle.
And that was not the only thing. I think we, being new entrants to the market, looked at things very differently. And we very specifically, for a period have built up a large exposure to palladium and rhodium. That was not by mistake. That was based on some of the fundamentals that we understood at that time.
And the net result is that we have built a leading global and I want to emphasize the word global, PGM Mining and Recycling position. And we established that between 2016 2019. And of course, that was very swift and decisive action. And we always represent our strategic thinking in sigmoid curves. And you can see how we built off our gold base, which we had discussed at the last Investor Day and you can see how we first acquired Aquarius Rustenburg.
And in fact, Lonmin was meant to be the 3rd acquisition and it moved out to the 4th because we recognized the changing palladium market dynamics and we also wanted to become global. That's a critical point. We're not just based in Southern Africa. We're not just based in Russia. We are global PGM company and we acquired Stillwater as our 3rd step, which also gave us the very significant exposure to recycling.
So it was rapid, well timed and obviously external and acquisitive growth. If you look at the timing of these acquisitions And I also at the same time want to cover how they were financed because we tend to forget you If you look at these graphs and we used to use them often in our results updates, but as I said on the previous slide, Aquarius and Rustenburg transactions were announced within 6 weeks of each other. Aquarius was a very vanilla transaction. It was designed to give us the basis of a PGM management team and it did that very well. The second transaction being Rustenburg was very specifically targeted to be done based on the synergies of these two assets.
And of course, that was one way of reducing the risk. And let's not forget about the synergies between the assets that we bought. It was well considered and part of the rationale and reducing the cost base. We then acquired Stillwater. As I said, that was actually going to be the last transaction, but palladium, we recognized was going to increase in price substantially.
We moved that forward. We also realized that Lonmin was going to get cheaper. There was no appetite to buy PGM assets at this point in the cycle. And that is all in our history. If you look, it was a total investment of ZAR44 1,000,000,000 or $3,300,000,000 and that amount of investment was covered by our 2020 adjusted EBITDA, 1 year of adjusted EBITDA is paid for all these transactions.
I think that's unsurpassed in any recent or any exposure I've had to the mining industry. I cannot remember such a successful M and A strategy. So very important, as I said, that these transactions and acquisitions were all identified and done in a very strategic way. As I said, Rustenburg and Aquarius were done to realize synergies. Lonmin was done at a low point in its history and again is on the boundary of Rustenburg and you will get more of this today from other presenters.
But what that's allowed us to do is build up a PGM business, okay, which is large material, but actually sits on the right side of the cost curve. And as you can see, many of our operations are moving into the lower quartile. The Stillwater operations, once the CapEx is completed, once we've had the ramp up, we'll move into definitely into the lower quartile. But these acquisitions, which I think are often perceived as non core assets to other companies and second rate PGM assets are clearly not. They are material in size, they are low cost and they are long life.
And that is a key message that I hope you see and understand and buy into today. As I said, the acquisition strategy was unparalleled in terms of value creation with short paybacks. And many of you will sit there and say, but you were lucky you had the wind in your sails from the increase in commodity prices. Remember what I said right at the beginning, we actually took a very conscious decision based on the research that we had done to move into this market in a very aggressive way so that we could capture what we could see as looming deficits. Not going to go through this table in detail.
But if you follow it line by line and really just go to the last column, payback on investment. You can see Aquarius has done at 4.3 times in 5 years, Rustenburg 3.8 times in 4.5 years Stillwater because of the heavy capital expenditure 0.7 times If you exclude the stream 0.8 times including the stream in 4 years, so it's nearly paid for itself. And Lonmin amazingly has paid for it 6 times in the 2 years that we've owned it. The payback on the total investment is just over 2 times during this period. So again, let me recap what made this successful.
It was a rapid delivery and execution of a clearly defined strategy. This was not speculating. This was well designed and carefully considered. Each transaction was carefully considered and the risks related to each one of these steps had to be explained and covered with our Board. We used quite dynamic financing and disciplined financing approaches to ensure that both the acquisitions were successful and it created value.
You would remember that Rustenburg was based on a structure where we paid for the assets out of future profits. You would remember a substantial part of Stillwater was paid back through a stream. And we are very, very happy with those structures that we put in place. We have proven through the acquisition sequence that we can integrate. And today we can certainly engage with just about any company and talk about a track record of proven integration.
The move down on cost curves, we've shown that there's been significant cost synergies, which were identified and many of you will know that we far exceeded our original intentions. This was a very agile and decisive approach and that approach is a competitive advantage. And I want to go to the next slide and just also just cover off on what is the relevance of that statement. So although today we're not going to talk about a green metal strategy or go into too much detail, but it's a clear evolution of exactly what you what I've just presented. It's a natural evolution of our value creation strategy.
And again, I want to say just like we did in PGMs, it's been before we made our first move, it's been in planning for at least 2 years. That strategic intention was announced more than 2 years ago. It started with the acquisition of SFA Oxford in Q1 2020 when it was closed. And remember, we had already done some of our own work. And that acquisition was really based on getting assistance and capacity to determine the most likely battery chemistries.
And that we've done, we have confidence in our selection and you've now seen it starting to play out. We're expanding our exposure to green metals through the battery metals as a start. And of course, I have mentioned the latent uranium potential that we discussed in the 1st Investor Day. We are also expanding and diversifying our existing recycling and tailings retreatment business. Today of relevance, there will be a discussion on recycling.
And I remember there were some questions at the previous Investor Day on recycling and we can certainly pick that up with today's session. We have made 3 battery metals related acquisitions in 2021. The very strategic acquisition of Caliber in Finland, the very strategic acquisition of a nickel refinery in France and then more recently, the joint venture with Ioneer on the Rhinolite Ridge project. And we will in the not too distant future as we add on a few more of our intended acquisitions, we will have a very specific focus on an Investor Battery Day perhaps even at the next announcement. So again, nothing different to what we did in PGMs and I think the track record is established.
We will be very disciplined in moving forward in this area, but I have the same good feeling about our entry into battery metals and building a green metals portfolio that I had when we made the entry into PGMs. So strategy is a consequence of conscious planning and positioning. Thank you. With that, I'm going to hand over to Richard Stewart, who will take us into the PGM market outlook. Thank you, Richard.
Thank you very much, Neil, and good afternoon to all our listeners and good morning to any of those who might be abroad. I think really looking forward today to sharing with you what I certainly believe is a world class PGM business that we have built over the last few years. And as we know, it all starts with the market outlook. Thank you. Our presentation does have several forward looking statements.
So, I would urge you all to consider the Safe Harbor statement at your leisure. I guess just to kick off when I reflect on when we got into the PGM industry, we've always asked why we were getting into it. And there were 3 fundamental answers to that, which we'll address all of today in one form or another. The first answer was that we had studied extensively the PGM market and we're firmly convinced of the fundamentals of this market, not only for the immediate few years ahead, but in the longer term. And that is certainly what we look forward to sharing with you in this initial presentation.
When we consider the PGM market, and I think we've said it on many occasions, PGMs are unique in so many ways. In this particular instance and as it relates to markets, PGMs are by far the most precious of the precious metals. It's a very small market. In total, primary PGM production is less than 15,000,000 ounces a year. When we compare that to the next most precious metal of gold, primary gold production is about 109,000,000 ounces a year.
And if you compare that to silver, silver is over 900,000,000 ounces of primary production a year. So PGMs really are a small market, but what makes them even more unique is it's underpinned by industrial uses. These are such special, such unique metals that play such a critical role in the world that we live in today, but it's a small market driven by industrial uses. And those two facts is what really drove the way we wanted to position ourselves in the markets and in the supply chain. In particular, our approach to our metals is not about just being a supplier and trying to trade our metals for a small premium of a couple of dollars here and there.
It's really about embedding ourselves into the supply chain, working closely with our customers to help them manage their or solve their solutions, but also about managing the overall balance between the such, such rare metals and not only the balance of total supply, but also the balance of the basket as we've discussed on so many occasions. What this has meant from our side is that we've developed an extensive customer network and base we work with. It's a global network, it's a global customer base and across as many different industries. We deal with OEMs, car OEMs, we deal with the AutoCAD fabricators and manufacturers, we deal with electronics and fuel cell companies. And this will continue to grow.
I think as we've also seen more recently, we've recognized that part of solving our customers' solutions is also looking at battery metals. And that too is a market that we've studied extensively and drive some of our thinking around the PGM markets as well. How all of this thinking translates into our marketing and sales strategy is that we are really focused on longer term contracts. Most of our sales is done with our customers on a long term basis. And that again is done specifically so that we can jointly manage a responsible supply.
We do short term spot sales as well on some of our metal and that is critical both to provide us with a level of operational flexibility, but also so that we can keep our finger on the pulse of what is going on in the short term tactical markets. But really what these long term contractual relationships have done and the value it brings to us is that we do work closely understanding from our customers what is driving their long term trends, their long term strategies and where demand is likely to go in terms of the strategies they are working on to deliver to what their customer bases ultimately require. Of course, we are sitting on the supply side of that curve. Supply is something we understand well. We understand the barriers of entry to this market.
We also understand the barriers of exit to this market and what it takes to bring a new project online. So I dare say, when we look at our markets, we look at the fundamentals. 3 months ago, we were asked sorry, a year ago, we were asked how did we see COVID impacting on PGM markets. And the conclusion we came to was that we saw some extreme risk for volatility in the short term. That outlook was driven by the fact that we saw differentials in the way supply was coming back online due to COVID lockdowns.
We also saw differentials across the globe in terms of how demand was reestablishing itself in different regions. And our concern at the time was that if you had a mismatch between supply coming online and demand coming online, that could lead to extreme volatility in the market. And I dare say that that has been even more extreme than what we thought could be the case at the time. There have been additional drivers I don't think anybody anticipated. And that led to a perfect storm earlier this year in terms of a shortage of supply and a significant increase in demand.
And the pendulum has now swung the other way. But I dare say when we look at what is happening in the market today, we have some of the most resourced research houses who are changing their forecasts on a weekly basis, who do not all agree with each other's outlooks. This is not a time when you can use what's happening in the market today to make long term fundamental predictions. Our positioning in the markets, our relationship with our customers, our fundamental review of the markets and what drives the long term, we do not think has changed significantly. And that is what underpins our long term thinking and strategic drivers and look forward to Cleanther sharing with you what some of that fundamental analysis is.
Thank you very much.
Thank you, Richard, and good morning and good afternoon to everyone. I'm responsible for PGM Sales and Marketing. We are quite careful to distinguish short term volatility from longer term sustainability. Let's first address the short term volatility in the market. Since early 2020, there's been a number of disruptions.
On the supply side, we had the Anglo ACP outage as well as COVID-nineteen related shutdowns impacting on South African supply. Earlier this year, we also saw the flooding and concentrator incidents at Narillsk. During these periods of supply disruption, we had producers in the market as buyers driving up prices. On the demand side, we saw COVID-nineteen impacting on auto, industrial and jewelry demand. Supply chain constraints and the global chip shortage continue to impact auto production even today.
And producers are flooding the market with spot metal, pushing prices even lower. We've also seen unprecedented number of changes to the vehicle forecast recently, which indicate to me a really high level of uncertainty, certainly around the short term. Short term volatility requires very tactical responses. We've navigated this well with insights and intelligence from our strong customer relationships, and this has informed our short term inventory planning and placement of metal into the market. Now changing gears to the much longer term.
We believe that the internal combustion engine does not disappear come 2,035, and in fact will still make up the lion's share of the light vehicle car park. Announced bans by various cities and countries will impact just over a quarter of the 110,000,000 light vehicles produced in 2,035. But what does this mean for battery metal demand come 2,035? Our long term balances for these critical battery metals suggests that battery electric vehicle growth may well be tempered. By 2,035, lithium demand will be 900 plus percent higher than this year's levels, and current deficits will continue to deepen.
Nickel demand grows from 250,000 tons this year to over 1,000,000 tons by 2,035, with nickel deficits forecast from the end of the decade. And cobalt demand grows 4 folds from this year, with deficits forecast from 2026 onwards. In contrast to the short term dynamics, our 10 year PGM market outlook is underpinned by solid fundamentals, which in turn informs strategic decision making for the business. We understand primary and secondary supply very well given our positions in these markets, and we also understand the auto market well, supported by our strong customer partnerships and insights. So let's dive into our 10 year forecast, starting with supply.
Given the lack of investment in South Africa, primary platinum supply drops from 6,000,000 ounces in 2019 to 5,700,000 ounces by 2,030, with just our K4 project and some very modest flat rate volumes coming to market in the second half of the decade. Although secondary supply is expected to see some modest growth of 200,000 ounces over the period, overall supply declines by a CAGR of 0.1% figure from 2019 over the decade. Moving on to palladium. We expect primary palladium supply to remain fairly flat from 2019 levels, with North American and Russian supply compensating for declining South African supply. Palladium recycling is expected to grow from 2,900,000 ounces in 2019 to just over 4,000,000 ounces by the end of the decade.
Overall, supply grows at a CAGR of 1.4% per year, driven by growth in recycling. Recycling is expected to make up 40% of total supply by the end of the decade. The primary rhodium supply mirrors that of platinum, with primary supply declining 9% over the period. Growth in secondary supply results in recycling making up around 40% of total supply by the end of the decade. Recycling supply is impacted by a number of factors, but particularly by PGM prices and steel prices.
Palladium and rhodium, both largely auto metals, are most sensitive to price platinum, less so currency. As substitution of palladium with platinum in gasoline autocats gains momentum, prices will shift, impacting incentives to return different metals to market. And because of this, we see some downside risk to our palladium and rhodium recycling forecast. Now moving on to the other half of the market equation and looking at demand. Palladium and rhodium remain largely dependent on auto demand, which makes up close to 80% of demand.
Historically, 20% of palladium was consumed in industrial uses and this has reduced over the years as a result of deficits and higher prices. As demand for palladium in water gases reduced through substitution, industrial demand could well return. 80% of platinum demand is split pretty much evenly between auto and industrial uses with the rest used in jewelry. There have been a number of revisions to light vehicle forecast since early 2020, just as the impacts of COVID-nineteen and supply chain constraints began to be felt around the world. In the space of just a short year between quarter 3 2020 and quarter 3 2021, Absolute light vehicle production forecasts have in fact increased, driven by upgrades to light commercial vehicles.
However, looking at the chart on the right, in the same short 1 year period, battery electric vehicle market share forecasts have increased significantly. Take 2027, for example. Battery electric vehicle market shares have increased from 9% up to 17%. Although during this period there were many political announcements around banning of ICE vehicles and OEMs responding with aggressive electrification targets and investment targets, we haven't really seen any fundamental changes during this period to warrant such significant changes to battery electric forecasts. There is very little variance in absolute light vehicle forecasts over the decade, and this is in fact the key driver for auto demand.
However, and as you can see in this chart, there is a significant divergence in forecast for battery electric vehicle market shares from around 2023 onwards, with some forecasts as high as 40% by the end of the decade. Our forecast in the dotted turquoise line is not too dissimilar from others, and we are looking at 12% battery electric vehicles by 2025 up to 22% by 2,030. Let's step back, Laura, and just put this into perspective. Last year, battery electric vehicle sales were 15% higher than they were in 2019, largely driven by incentives and subsidies in China and Europe. Going even further back, battery electric vehicle sales grew at a huge 82% CAGR between 2010 2020, but of course of a very small base.
Our forecast implies a sustained annual growth rate of 26% every year for 10 years in order to hit these battery electric vehicle forecasts. This won't be easier to achieve and therefore we see some downside risk for BEVs as well. Our light vehicle production forecast grows over the decade. And despite the growing battery electric vehicle market share, internal combustion engine production peaked at 88,000,000 cars in 2027, much higher than even the 2019 levels of 85,000,000 cars. Internal combustion engine vehicle production remained stable over the decade in the light vehicle segment.
Heavy vehicle production is also forecast to grow over the decade, with ICE continuing to dominate the engine mix. 6,200,000 combustion engine vehicles are produced in 2,030 compared to just 5,800,000 in 2019. We are also quite bullish on fuel cell vehicles towards the end of the decade, forecasting a 7% market share by 2,030. With longer driving ranges that heavy vehicles require and comparable refueling times to diesel vehicles, fuel cell engines are much more suitable in heavy duty vehicles. Recent announcements on deployment of fuel cell buses and truck fleets, as well as hydrogen refueling infrastructure rollouts and further targets, particularly in China, Japan, South Korea, California and the EU, have also been very encouraging.
As hydrogen refueling infrastructure is deployed to support route bound heavy fleets, light vehicles will also be able to take advantage of these infrastructure. So overall, the number of ICE vehicles remains robust throughout the decade, supporting PDM demand. Tightening emissions legislation in both heavy and light vehicle segments is also supportive of PGM loadings and hence demand over the decade. As you can see from these graphs, average loadings rise to meet regulation, followed by periods of drifting to reduce costs while still meeting emission standards. It's expected that Euro 7 will be the last set of internal combustion set of internal combustion engine emission standards around 2027, and it's also expected that the U.
S. And China will also follow suit. Moving on to substitution. Following a very successful project with BASF to substitute palladium with platinum in gasoline AutoCats, uptake of the substituted AutoCats was faster than expected and this was largely driven by the ability to self certify catalysts in China. Substitution levels of 20% to 50% are being requested by OEMs.
We're forecasting 1,500,000 ounces of platinum added and palladium removed from auto demand by mid decade. In the medium term, this creates a far more sustainable 2 gs demand that is far better aligned with the supply basket. Of course, having the pendulum swing too far is not ideal. Our project with BASF took 3 to 4 years from research and development to commercialization. The resulting TriMetal catalyst has been approved and certified such that tweaks to the ratios of the 3 PGMs doesn't require recertification.
So going forward, the timeframes to adjust Catalyst composition are more likely to be in the 6 to 12 month range, which will allow for far more controlled substitution in the latter half of the decade as price incentives change. I also mentioned earlier that we are a lot more bullish on our fuel cell electric vehicle forecast in the heavy vehicle segment, and this drives platinum demand moving up to just over 1,000,000 ounces by the end of the decade. I think the most important thing to point out here is that auto and stationary fuel cells can be fueled by gray and blue hydrogen, as well as by hydrogen containing fuels such as methanol. Fuel cell demand is therefore not necessarily coupled to green hydrogen and electrolyzer demand, and certainly not in the next decade, while green hydrogen costs remain high. Demand for green hydrogen and hence PGMs in electrolyzers becomes relevant post 2,030.
Similar to our approach on battery metals, we're doing our homework to understand the entire green hydrogen value chain and identify opportunities for us. So overall, platinum demand increases as a result of substitution as well as growth in fuel cell electric vehicles. We forecast declining platinum jewelry Palladium demand declined almost 2,000,000 ounces over the period as a result of substitution and as ICE vehicles begin to taper at the very back end of the decade. Tightening emissions legislation is supportive of rhodium demand through the period, despite drifting in both the auto and industrial segments. Similar to palladium, demand tapers at the very back end of the decade as battery electric vehicle market share increases.
So putting our supply and demand together, let's look at our market balances. Taking into account the ability to more closely control the rate
of substitution in shorter time frames
and our view of the scenarios. Looking at the chart on the left, the gray columns show our base case with platinum moving into deficits through the decade. As substitution rates respond to changing PGM price incentives, we expect to see a more sustainable deficit for Platinum from 2026 onwards, and you'll see we've modeled this in the turquoise columns. Similarly, we showed both base case and control substitution for palladium balances on the right hand side. And here you'll see palladium surpluses reducing as substitution is more controlled on the turquoise bars.
We also show our scenario where palladium recycling forecasts are reduced by just a small 10% from mid decade onwards, which results in a further reduction to the expected surpluses towards the end of the decade. Moving on and looking at our 2E balances, we forecast a sustainable market balance in our 2E base case. Taking into account the downside risk to palladium recycling results in a much tighter 2E market balance with more modest deficits from 2025 to 2028 before moving into small surpluses post that. And then looking at the chart on the right, the rhodium market is forecast to remain in deficit from 2022 to 2029 in our base case. Our reduced recycling scenario, however, results in deeper deficits through the second half of the decade, with rhodium moving closer to balance by 2,030.
So putting all of this together and just summarizing what we've looked at, we understand supply extremely well given our position in the primary and secondary markets. Primary PGM supply declined over the decade, particularly for platinum and rhodium. However, supply is supported by forecast growth in recycling, but downside risk does remain. The internal combustion engine underpins auto demand throughout the decade. ICE vehicle forecasts remain well supported over the decade due to a growing car park, despite increases in market share for battery electric vehicles in the light vehicle segment.
In the growing heavy vehicle segment, ICE continues to dominate the engine mix. And adoption of fuel cell engines in the Heavy Vehicle segment will accelerate in the second half of the decade, supporting platinum demand. Tightening emissions regulations supports PGM loadings over the decade. Over the medium term, up to mid decade, substitution of palladium with platinum in gasoline vehicles helps balance the 2E basket. Overall, we forecast a sustainable 2E balance over the decade, with palladium moving into surplus and platinum moving into deficits in the second half.
Rhodium remains in relatively small deficits through to 2029. Time frames to change metal ratios in TriMental Catalysts have reduced significantly, and this will allow for faster responses to catalyst formulations as metal price incentives change. Ultimately, this will result in an even more sustainable 2E balance over the second half of the decade. Modest reductions in palladium and rhodium recycling in the second half of the decade will reduce palladium surfaces even further, better balancing the 2E basket while moving rhodium into deferred deficits after 2029. Our operations are ideally placed to deliver into this PGM market that we understand well.
I'll now hand us over to James for questions.
Thank you. Thanks, Cleanther. Thank you, Richard and Neil. We're just going to go through a couple of questions before we have a break. The first question directed to Neil, I think, is from Arnold Van Kran at Nedbank.
Do you believe you can get the same type of leverage from battery metals as you did in PGMs, which you bought for knockdown prices at the bottom of the cycle? Is it not harder to deliver value in battery materials given that many other companies are chasing the same assets? Neil?
Yes. Thank you, James. Hello, Arnold. Your point is spot on in that I think it would be very unrealistic to assume that we'll achieve exactly the same type of returns. Recognizing that with the PGM strategy, we had very little competition.
But I have to say that there's many similarities. And I would go as far as to say, we will create value. How much value we will create is remains to be seen. But you've just heard from Richard and Cleanther that a 900% anticipated increase in lithium is enormous. And of course, we don't believe that the penetration rates of battery electric vehicles are as high as others might say.
So I think we have a very realistic view. But also when we acquired Aquarius Rustenburg, we used current spot prices we which were depressed. We've been very conservative on our battery metal assumptions, which I again believe are conservative for the very reasons you've seen in the supply and demand analysis and some of the comments that Cleanther specifically made. And when we acquire, we make sure that even under those conditions, we have a suitable internal rate of return to ensure that we create value. So I dare say we will create value, but I think the PGM strategy and the net results of that is unsurpassed and will be very difficult to beat.
Thanks, James.
Thanks, Neil. The next question is from Wade Napier at Avior, and I think it's directed to Kiantha. Is there not upside risk to loading forecasts if OEMs focus more R and D on electrification instead of thrifting?
Thanks, Swede. I think the fabricators are still going to focus on AutoCAD thrifting. Getting the loadings down as much as they can impacts their margins. So I don't think there's going to be too much risk to that. I imagine that the OEMs actually will tend to, as they do now, rely on the fabricators for that.
Thanks, Fred.
Thank you. The next one is from Chris Nicholson at RMB Morgan Stanley. Could you run through the strategic partnership with Johnson Matthey? What are you aiming to achieve? What are the financial benefits to Sibanye Stillwater?
And are there any costs? I think Richard, if you'll take that one, please.
Sure. Thank you very much, and Chris, good afternoon. Yes, Chris, I think as mentioned in the introduction, a lot of our strategy really goes around how we work in the supply chain and ultimately working with our end customers. And this strategic relationship talks directly to that. To answer your question directly, it's not aimed at financial benefits, and there are no costs to us.
We obviously have a commercial relationship with Johnson Matthey on many fronts, particularly in the U. S. Where they do a lot of our refining for us from water and recycling, as well as various market development initiatives that we've worked on. So this is really a relationship designed around market development initiatives, new product development and again, understanding long term supply and demand dynamics and how we can work together to manage that. So yes, it's not a cost or financial benefit.
It's more of a strategic benefit for both of us in the supply chain and industry as a whole.
And the next one again from Chris is for Cleanther. I think could you explain what drives your downside risk to palladium and rhodium recycling scenarios? Is it collection chains in Asia, recycling capacity or other factors? How likely is this?
Thanks, Chris. Look, I think just first up to explain that it is a downside scenario. It's not our base case. And then also just to note, we're seeing supply come off. We can't expect to see recycling growing at a significantly higher rate than supply over a long term.
So that's just one point to note. But in our downside scenario, really what's driving this is the price incentives. So if we think or assume that palladium and rhodium prices decline over the decade, just given the slight drop in combustion engine vehicles, we would expect to see that platinum starts coming back to market faster, just given how that's expected to grow. And that gives us the downside risk on palladium and rhodium. Thanks, James.
The next question is from Ntukor Sitole from SBG Securities. Given tighter emissions requirements expected in the future, could you please explain why average PGM loadings per light vehicle are expected to decline towards the end of the decade? I think that's for you again, Tiantha.
Yes. Thank you. Look, as you would have seen from that chart, the loadings will increase up to sort of 2027 when we expect Euro 7 to come into play. But I think as soon as that happens and the emission standards are reached, all of the fabricators and OEMs are going to start drifting out again, and that's what causes that little tail at the end.
The next question is from Bruce Williamson at Integral Asset Management. I hope I pronounced that correctly. Have you done any research into the thawing of the Arctic Circle permafrost? And have you taken any disruptions into Norilsk's future PGM production into account? Neil, I think could you maybe answer that one?
Yes. Thanks. Hello, Bruce. Look, we factor into our supply, I want to say, a realistic forecast of all projects. And of course, mining is our core competency and we are able to assess the likelihood of many of these projects coming online.
So yes, I don't want to be very specific and be critical of any specific projects, but yes, they factored in. And I think most of these projects are ultimately too late. That's all I'll say. Thank you.
Thank you. The next one is from John Williams at Resco. Do you think auto OEMs have been stocking PGMs over the last few months, which would represent a short term supply and demand headwind? Cleanther?
Thanks, James. I don't think there's been too much stocking up. We've seen the fabricators continue buying at normal levels and normal contract levels. And from what we're seeing in the market, I would say there's very little incentive for the OEMs to stock up. I mean, they're very focused on working capital.
They would have to hedge out quite long term if they're keeping this for next year. So I would say we haven't seen that. And where we have seen fabricators or OEMs taking perhaps more metal than they need, they often take this in ingot form. So less of a stocking up and more of holding that in as an investment for the shorter term. Thanks.
Thanks, Kiantha. The next one is from Raj Ray at BMO Capital Markets, I think for Neil. Do you have a target with regards to commodity mix within our portfolio between PGM Gold and Battery Energy Metals in the medium term? Based on PGM market research, do you see PGM price okay, that's a couple of questions. Let's just deal with the first one on the portfolio mix, please, Neil.
Yes. Hi, Raj. And it's a good question because if you want to get the benefit of any portfolio of metals, they've got to be material to your revenue line and your income statement. I would say that in the medium term, we would target something like a third gold, a third PGMs and a third battery metals, something in that order. Of course, it's not an exact science and we'll have to see how it evolves.
But certainly, each one should be material to our bottom line. Thank you.
Thanks, Neil. The next one, I think, for Richard, based and it's also from Raj Ray. That's the second part of the question. Based on your PGM market research, do you see PGM prices going back to record levels seen in H1 'twenty one once the semiconductor issue gets resolved?
Thank you, James, and good afternoon, Raj. I mean, I think as mentioned upfront, what we think we're seeing in the market at the moment is extreme volatility. Some of those record prices were driven by the
disruptions in supply that we
saw both at Anglo and at Norilsk. Currently, we're seeing exactly the opposite. That Currently, we're seeing exactly the opposite. That supply that was constrained is now really coming out of the bottleneck and coming back into the market. And we've seen demand being constrained due to the chips.
I think we still have a risk of volatility over the next 12 to 18 months. I think we're still going to see some disruptions to supply chains as a result of COVID as we work through the rest of pandemic. And therefore, I think volatility to prices remains something that we need to live with and deal with in the short term. I wouldn't like to speculate as to exactly the levels that could go to. Like I say, I think the levels we've seen was driven by a perfect storm towards the beginning of this year.
We have more of those short term storms? Possibly. But for us, the fundamentals are really what are the fundamentals look like 3, 5 10 years out. That's really the key for us for planning our business, and I think that's where we're a lot more confident. Thanks, Raj.
Thanks, Richard. Given the time constraints and the agenda that we've got, there are a few more questions, but we'll hold those over to the end of the session, if that's okay with everyone. We'll just go to the dial in lines or phone lines to see if there are any questions there, please.
Thank you. The first question comes from Dominic O'Kane from JPMorgan. Please go ahead, Dominic.
Thanks, guys. Thanks for taking my question. Just a quick question on sort of your long term contracts. You say that the majority of your sales were on long term contracts. Could you just maybe give us a bit of visibility on how that splits across platinum palladium rhodium?
And critically, I guess, given the volatility that we've seen over the last 6 months, are you seeing any change in customer behavior for long term offtake? And specifically, what I mean is platinum. Given you've got a bullish outlook for platinum, are customers looking to increase their sourcing requirements long term for platinum?
Thanks, Dominic. I think Richard, will you take those questions?
Yes. Dominic, thanks. Simon, in terms of our contracts, obviously, not going to go into the details of it, but I guess to broadly say, our contracts roughly reflect the basket that we supply in, and we try
and match that basket, of
course, with the needs of our customers. So again, I think this is what's so critical in terms of the longer term strategy we adopt and how we engage with our customers and how we drive the market development we're working on. So broadly speaking, those contracts reflect our supply basket. In terms of have we seen any differences, no radical changes. Again, those are contracts that are designed for longer periods of time.
We do look at them and tweak them occasionally to work together with our customers. So we constantly see small changes given dynamics in the market, and obviously, we also try and balance that with the spot sales we have available. But no, we haven't seen any fundamental changes yet coming into those contract discussions.
[SPEAKER
STEPHEN ROBERT BINNIE:] Thanks, Severin. I think
we'll take a break now and then we'll start the next session at 2 o'clock our time sharp, so in about 7 minutes. Thank you.
So good afternoon again and welcome back to the 3rd session. Today, we're looking at our South African PGM assets. I dare say it's such a cliche to refer to a Phoenix, but just thinking back 5 years ago, so many of these assets had largely been written off by the market. And I think today we will show you that in the form they are today and what we have achieved with these assets, these will really underpin a leading business as we move forward with our PGM assets for a long time to come. Again, I'd ask you please to consider the Safe Harbor statement.
There are several forward looking statements in the presentation. Thank you. So just to kick off from a high level, the location of our assets and operations in Southern Africa. The big base of our operations are, of course, the Western Limb in the Rustenburg area. That is where our 3 big operating mines sit in Rustenburg, Creuendal, Morikana and of course they all have surface operations.
In the Eastern Limb, we have 2 operations that are on care and maintenance being the Limpopo or Bayou Boeb operation and Blue Ridge. And we have several greenfields projects as well. In the Northern Limb, we have the Akanani project that sits in between Ivan Flats and Mogalakwena. And then we have a 50% shareholding in Momosa that is operated independently in Zimbabwe. So a good spread across Southern Africa.
I think critically and this is really the slide I indicated to you when we started our last presentation that when we got into PGMs, we were asked why and there were three answers to that. One was understanding the PGM markets. One was the fact that we were comfortable with PGM Mining and so far as it was narrow tabular ore bodies, very similar to what where we had achieved some significant success in our gold business by applying a new operating model to those mines. But the third aspect was we recognized the opportunity for consolidation in PGMs. Many of our operating team had been through the years of consolidation in the gold industry, where quite honestly without consolidation it would have been questionable whether or not that industry would have survived.
Putting operations, putting companies together does provide the ability to cut costs and that enhances the overall sustainability of the operations. And that was fundamental to our entry into PGMs. And when we look at the slide in front of us, what we see is a set of assets where 5 years ago we would have been looking at 3 independent companies. We had the Kroondahl or the Aquarius company, the Kroondahl operations. Contiguous to that was the Rustenburg Platinum Mines and by Anglo Platinum and adjacent to that the Morikana operations owned by Lon.
So effectively what we had on the slide was 3 companies. That means 3 management teams, 3 sets of overhead costs, 3 different ways of operating, 3 sets of surface infrastructure, 3 completely different approaches. But when we look at the but practically one continuous 60 kilometer
ore body. Technically 2 in
terms of the UG-two
and Merensky, but practically one continuous 60 kilometer ore body. And the way to optimize value through that is by treating it, planning it, mining it as one ore body. And by being able to put these together, we have been able to demonstrate the value of that quite successfully. Thank you. So the best way to demonstrate this is through the synergies that we have already achieved.
At our Rustenburg and Krondahl operations, we achieved over ZAR1 1,000,000,000 of synergies per year within the 1st year of integrating those two operations. Subsequently, of course, we have acquired the Morikana operations. And in under 2 years, we've been able to realize almost $2,000,000,000 in synergies from the integration of those operations. I dare say that these synergies have largely been realized through the application of our operating model and the shaving of overhead costs and operating structures and that there is still significant value to come through the proper optimization of mine planning by dropping mine boundaries as well as sharing surface infrastructure, including depositional capacity. And that is certainly something that we are continuing to work on.
And I think we'll still bring a lot of value in the years to come and the not so distant future. I think the other important point to make is that so often the concept of synergies is seen just with job cuts. However, the realization of these synergies ultimately resulted in the preservation of over 12,500 jobs at our Rustenburg operations that would have been lost had this not been realized. At Marikana to date, we have already managed to preserve just under 3,000 jobs that would have been lost had these synergies not been realized. So in total, that 15,000 jobs and almost 150,000 lives and livelihoods, which have been impacted through the successful integration of these operations.
Of course, as we know, we have experienced the windfall in terms of PGM prices, but I dare say even without that increase in prices, the realization of these synergies would have moved all of these operations from the red back into the black even if prices had not moved and that was the value of the strategy we undertook. Particularly pleasing has been the integration of Marikana into the company. Over the last 24 months, we have managed to realize a 12% nominal operating unit cost achievement. In real terms, that is more than 20% that we have managed to reduce our unit operating costs by. And that is with the 14% decrease in total production output.
Essentially, this has been a process of streamlining operating models, of removing unprofitable ounces, of focusing production in areas where it counts the most, getting efficient and overall integrating this into our broader business. This has been a real success story on how integration and realization of synergies with a focus on your core operating model can make a significant change to the sustainability of an overall operation and one we are very pleased to have in our stable. Of course, what this has meant to the company as a whole is that where we started off very much on the right hand side of the cost curve and previously Neil would have shown you a cost curve that included capital. This is a cost curve just looking at our cash costs. But where we had a business very much on the right hand side of the curve and I dare say a perception that still exists today, But the realization of these synergies and embedding that into our operating practices has meant that this is now firmly a second and third quartile business, very firmly sitting in that position.
And as I mentioned, with the ongoing realize of the longer term synergies achieved through optimal mine planning, through optimizing surface infrastructure and through the benefits of the capital investment that we're making now to come through, I dare say that we will see ourselves continuing to move down this cost curve, but a very competitive position relative to many of our peers. I think the second perception about these assets that we often hear and are discussed is the fact that they are short life. And I'd like to just share with you some numbers in the next few slides. And firstly, just to point out the fact that we have a resource base within our South African PGM operations or Southern African PGM operations of over 350,000,000 ounces. That compares to reserve base of only 46,000,000.
And critically, that 3 50,000,000 ounces, the vast majority of that actually sits within brownfields projects adjacent to our existing operations. These are not greenfield projects that require significant new capital, new permitting, new processing facilities. This is within our existing operational base and provides a significant amount of upside to the life of our operations. I dare say the perception of the short life may well have come from ourselves. At the time that we did these acquisitions, we had to be very clear that it was at a time of depressed markets, depressed PGM prices and then trying to justify capital expenditure at that time and at those prices was very difficult.
As a result, we had to make sure that our acquisitions could be underpinned by shorter life of mines that did not require significant capital investment. That had to underpin our fundamental thesis of the acquisition costs we paid. And as a result, those are the life of mines that we shared with the market. I dare say that even looking at the slide, that's still a 20 year life, but it is a declining profile. We have subsequently launched and commenced with projects at K4 and Klippontaine, which adds a little bit of life, but overall a declining profile.
And I guess that is what has underpinned the perception of shorter life assets. However, if we take the resource base that we have, looking at the next slide, what we can see is that we've been able to identify just within our current operating environment, some 20 projects that includes over 100,000,000 ounces of potential reserves. 20,000,000 projects that are in our pipeline, 3 of which that have been through a feasibility study and 2 have been approved for capital expenditure. But looking at the other 20 projects, barring 3 of those being Akanani, Blue Ridge and Baobab, the balance of all brownfields to our existing operations. If we take just 5 of these projects, and on the next slide we'll demonstrate that just 5 of these 20 provide us with the ability to sustain our current profile for more than 20 years.
That is just 5 out of 20. We have a significant resource base of which we can sustain these operations. As I mentioned, these are brownfields projects, low risk, and leverage off existing infrastructure, have the processing capacity in place. But certainly, at the time, we do not have a concern with a resource base to grow, but rather strategically when is the right time to be investing in these resources for our company and for the markets that we serve. And with that, I'd like to hand over to David van Aswieten, who will take us through the details of these operations.
Thank you.
Thank you, Richard, and good day, ladies and gentlemen. My name is David Van Aiswiegen, and I'm the Executive Vice President of the South African PGM segment. Our segment employs 48,500 employees, both own employees as well as contractors. The South African PGM leadership brings about years of experience in different fields of mining, and I would like to introduce the members. Dormann Mkumalu, Senior Vice President and Head of Human Resources Roderick Mokovani, Senior Vice President and Head of Finance Kevin Robinson, Senior Vice President, Technical and Service Operations Floyd Masamulla, Senior Vice President and Head of our Rustenburg Operations Ongikosi Mokulunga, Senior Vice President and Head of Mining for our Crue and Al Operations and lastly, Johan Klein, Senior Vice President and Head of Mining of our Americano operations.
The good safety record of the 3 integrated entities was maintained throughout the various integrations with a stable safety performance being sustained. Our care values are fully embraced and incorporated into all levels of the segment, which in turn forms the base of our group Zero Arm strategic framework. The South African PGM segment also ascribes to the ICMN principles of which Sibanye Stillwater is a member of. The cultural transformation process is currently being rolled out across the South African PGM segment. The focus of this process is in support of the Empowered People pillar within our Zero Harm strategic framework.
The South African PGM embraced the real risk reduction protocols, which are a set of rules designed as minimum requirements in 16 key processes across all our operations. All risk assessments, standards, procedures and training material are being revised to ensure that all protocol requirements are fully embedded. Leading indicators are increasingly being utilized within all levels of our segment. This assists us in proactively focusing on high risk activities and workplaces and is cross pollinated by lagging indicators taking agencies and behaviors into account. Our safety strategy is fully rolled out across all our operations within the segment.
The South African PGM segment embarked on a full ISO 14,045,001 integrated accreditation and certification process during 2021. Our Marikana operations and Rustenburg and Kruendal mining operations have recently been certified, and we envisage that the complete SA PGM segment will be certified within Q4 2021. The ICMM reporting principles were also adopted and the South African PGM is recording the total recordable injury frequency rate as a new KPI since the start of 2021. As a segment, we also have achieved some significant milestones during 2021 with our PGM process operations recording 13,000,000 fatal free shares, Marikana Mining Operations recording 3,000,000 fatal 3 shuts and the combined South African PGM segment in the excess of 4,000,000 fatal 3 ships. The underground ounces profile depicted in this graph is based on the 2020 life of mine reserve and resource plan and also assumes attributable 50% from production from our Kuranda and Momosa operations.
The lower cost K4 and Klapfontein open pit projects, which were approved in Q1 2021, are included and it maintained a consistent profile. None of the previous mentioned project studies are included in this process, which brings further upside and extension to the profile within the South African DGM segment. The all in sustaining cost is influenced by royalty assumptions. The reserve price for the 2020 life of mine calculations were based on the 3 year trailing metal prices. Included in the cost is the synergies that emanated from previous integrations of Grundal, Rastenburg and Marikana into Sibanye Stillwater and that equates to about ZAR2.8 billion.
NASHAR guidance was followed for future electricity tariffs and also does not include any upside potential from our strategic energy sourcing projects. Our surface operations are long life assets, which comprise of the Marikana Bulk Tailing Treatment, the Eastern Tailing Treatment, the Rustenburg Western Limb Tailing Treatment Plant and Platinum Mal from which we acquired full ownership in July 2021 from a previous 91.7% stake. Improved methods were introduced within our surface mining areas, which resulted in safer, more efficient operations. Testing of flotation technologies to recover ultrafine chrome is currently being piloted with early indications being very successful and can contribute significantly towards our current production in the future. Our current surface operations are forecasted to end in 2027.
However, current expansion opportunities are reassessed across the SA PGM footprint, which can extend the profile. The average operating cost is just below ZAR 110 a tonne, but our all in sustaining cost benefiting from our byproduct credits. Due to the homogeneous nature of our ore body and mining mix across the 60 kilometers strike distance, no material differences with regards to head grade are seen within our profile. This also brings about consistent recoveries and further changes with regards to our operating strategy can optimize future returns, thus ensuring a stable production profile as indicated previously. Our staying business capital expenditure is estimated at between 8% 12%, respectively, for our conventional and TMM operations operating cost, which excludes electricity cost and supports our production profile.
Our stay in business capital includes initiatives that support safe operations, infrastructure upgrades, ESG compliance, PMM replacements at our Kroeendal operation and Rasterbergs Batupele mine as well as our continuous ore reserve development at our conventional operations. The total capital expenditure also includes our growth capital of $4,000,000,000 for K4 shaft and DKK66 1,000,000 for the establishment of our Kloeffnern open pit mine that is due to commence in Q4 2021. Also to note is that the current planned capital expenditure excludes any of the unapproved projects as discussed earlier. Our base metal output is supporting our 2020 life of mine profile and significant quantities of base metals are produced. Through the existing metallurgical process, nickel and copper as primary base metals also support the bigger Sabania Stillwater strategy.
Our world class concentrating facilities have got adequate capacity and flexibility to treat both underground including K4 material and surface material and is supported by suitable tailing storage facilities to embed our ESG strategy. Through our continuous optimization, which included design enhancements, improved monitoring and the implementation and adoption of industry based practices, we have seen a substantial improvement on the reliability of our furnaces. We are currently operating below the required SO2 legal limits as prescribed by the South African legislation. Our smelter capacity is also aligned with our ore blend and support our 2020 life of mine profile inclusive of Perforshaft potential creation of additional value to optimizing and increasing throughput capacity at our BMR and PMR, which are currently running at 50% exist and is aligned with future opportunities. Thank you very much, ladies and gentlemen, and I'll now hand over to David Kovarski.
Thank you, Darby. Hello, everyone. I'm David Kovarski, Senior Vice President of CHROME. Firstly, for those who don't know it, CHROME is the ingredient in stainless steel that provides stainless steel with its corrosion resistant qualities. Without chrome, there's no stainless steel.
Sibanye Stillwater has a total of 9 standalone chrome plants and are all at the back end of our PGM concentrators. Mining costs are not allocated to the plants and the biggest costs incurred are logistic costs to China. Despite Transnet's poor performance, we are meeting our scheduled vessel bookings by tracking part of our production to Richards Bay, which is our primary export port. In 2021, we will receive full economic value on about 800,000 tons per annum. This includes an increase of 90,000 tons per annum after the expiry of its Cemancor contract at the end of 2020.
The balance of our production is subject to legacy agreements that yield below full economic value. Since their acquisition, there have been good production increases at the Rustenburg and Krueendale plants. Now a few words on the proposed chrome export tax. Together with other UT2 and primary chrome producers, we are opposing a proposed tax on the export of chrome ore. The tax is designed to assist South African ferrochrome producers by increasing the input costs of the Chinese ferrochrome producers.
The South African chrome industry employs more people than the South African ferrochrome industry, 10,800 people or 70,000 direct and indirect jobs versus 6,900 jobs in the South African ferrochrome industry. Based on detailed economic research, we are of the strong opinion that tax will result in a net loss of jobs and South Africa will be worse off. The only way to assure the viability of South African ferrochrome producers is to lower their cost of electricity that has increased by 500% since 2008. South Africa's electricity cost is far higher than China and higher than India and Kazakhstan, who are South Africa's other ferrochrome competitors. Lastly, chrome is well positioned to add meaningful value to our PGM business, and we continue to strive for greater operational efficiencies that we will achieve.
I'll now hand over to Rodrik. Thank you.
Guys, thanks, David. My name is Roderick Mungoani, the SVP Finance for the SAP GM segment. I am responsible for the finance at the segment level. Looking at the slides on the finances side, the first slide shows basically the SA PGM operating cost breakdown, how it has been cost has been broken down. The total breakdown in operating costs for the SAPGM consists of labor costs, contractors costs, utilities, stores and consumables, sundries, which is actually including the rehab costs, toll charges at the Rasenbank operations and overheads.
However, it is actually excluding the 3rd party purchases at the Marikana operations. And if you look at the pie chart there, 50% of the operating cost is made up of labor cost and contractors, which is largely driven by the wage agreements. Stores and material costs constitute 25% of the operating costs and that includes normal consumables and TMM maintenance costs And there are still actually costs that is actually related to the plant costs and explosives, underground support and chemicals to mention a few. And all these costs are actually, as we speak, above the inflation parameters as in you know that now they have actually gone up year on year. Utilities in the segment constitutes 9% of the total basket of operating costs and is mainly derived from the increases as guided by Mersa.
This year, the average increase year on year was 12% as per the guideline, which is 7% above the inflation parameter. The OVAIS costs for the segments constitute 5% of the total operating costs and it actually consists of the group charges and the online charges inside the operations. Bear in mind that, Noah, the segment carries 68% of the group charge as a whole. We do have some projects that within our segment that we are running to actually reduce costs like, for instance, the fit for growth projects, which is in line with our procurement or contractors reduction of the spend. We targeted around, say, ZAR800 1,000,000 for the group.
And our pushing for the segment is basically sitting at ZAR415 1,000,000. So that is the fit for growth initiatives that we are actually running then. And then one other sort of like footprint reduction projects that are actually getting done at the segment under the leadership of Ralph, our VP Engineering. If I go basically to the breakdown of costs in line with our operations, You could see that in the operations as we have got it there, Rasenberg operations are semi mechanized and they've got actually the conventional portion as compared to Marikana, which is fully conventional. And Marikana has got a downstream processing plants, Fondal 100% mechanized.
Having said that, Marikana being a conventional operation will reflect higher labor and the consumables at 43% and 28%, respectively, mainly due to the downstream processing plants for smelters, PMR and PMR. You will notice that in our in Rasenbeck operations, we do have 11% tolling charges at and which is associated to the Anglo Offtake Agreement for smelting and refining, which is also part of the cost that Rastenburg operation actually carries. Groendale operation being a mechanized operations, they are quite easily efficient with less employees on average around, say, 5,000 200 employees producing 130 tons per employee comparable to conventional operations producing at around say 41 tons per employee. So hence, the operations in Grundale, they are reflecting a lower percentage of labor cost as compared to other operations on the conventional side. If you look at the pie chart, you actually notice that 4% of the operating cost in the segment are associated to the running expense of chrome plants and the transportation of chrome from basically the mine to market.
And then the next slide shows basically how the breakdown between the fixed and variable costs. From the segment point of view, you could see that now the splits is 55% fixed on the costs and 45% variable. However, we should look at the mechanized shafts that are carrying lower percentage than the actually the conventional shafts. I mean, you'll recall that, Noah, the underground conventional shafts have extensive infrastructure to maintain. Hence, they are actually fixed costs are actually higher than the mechanized.
The kronedal mechanized operations are less expensive by May jump as comparable to conventional due to low intensive labor costs and contractors costs alike. The fixed cost mainly consists of labor costs, electricity and overheads and contractors, which is basically across the operations in line with all the operations cost base. However, the variable costs are linked to production output such as stores, incentives and overtime shifts. And that's in a nutshell give us more flexibility of running these assets as in we have got mechanized operations with lower sort of like costs and the conventional being actually the high intensive kind of labor and then that flexibility started to actually kick in. So looking at the next slide, it actually gives you an indication of the definition of our all in sustaining cost rent allowance.
In this case, I'll be excluding the 3rd party purchases at Marikana. And then looking at the definition itself, which was developed by the Royal Gold Council and generally adopted by the industry on the gold sector to ensure the consistency and the comparability and comparable reporting of costs. Therefore, the segment as in the SAPGM has also adopted such reporting standards as best practice. When you look at the graph as presented, you'll see that, Noel, included in the calculation of the all in sustaining costs is the credits derived from the sale of byproducts such as nickel, copper, uranium and ruthenium, which is linked to the average market prices. Royalty for that matter, if you look at the graph, was basically significant and had a very significant impact in the all in sustaining costs.
And it is actually deemed as in uncontrollable costs as it's driven by the market crisis as well. And if you look at the graph continuously looking and going to your actually end of the graph at the end, the all in sustaining cost for H1, you could see that now for the segment in H1. The segment reported just below ZAR17000 per ounce as in as the cost that has been reported and that is actually out there in the market. And if we exclude the 3rd party purchases, Marikana was sitting at around, say, ZAR17700 per 40 ounce and then RAS and Paper Operations sitting at ZAR18000 per 40 ounce and Groendale actually sitting at ZAR5 1,000 per 4E ounce. So that is how the definition of the all in cost has been structured and we have been utilizing it consistently for years.
And then going to basically the value that the byproducts brings to our calculations of costs. Over
3 or 5 years, if you
look at the graph, we have seen a significant growth in prices of the byproduct metals. You could actually see that now our iridium comes increases increased by actually 731% over that particular period. Ruthenium increased 1680 percentage for that particular period. And nickel actually increased by 187% and copper increased by 198%. And this significant growth in the byproducts resulted in the byproduct credits improving from ZAR815 an ounce in 2016 to a RMB4,100 an ounce during half year of 2021.
So that is actually quite significant if you look at the numbers. You will notice that Noah this is an indication that Noah the monetary value in the byproducts offsetting our cost profile. In a graph, you could see also on the positive impact of the byproducts as in on the pie or on the bar graphs. This is an indication that Noah going forward, we have got an advantage as the weather is moving to the battery and electrical vehicles that the demand for our byproduct is actually expected to increase, thereby, as you improve the value of byproduct credits going forward. So that is positive on our side as a segment going to the future.
Okay. Now I can hand over to Ralf to continue with the presentation. Thank you.
Thank you, Roderic. Hi, everyone. I'm Ralf Lombard, Senior Vice President, Projects. I'm going to take you through 2 of our company's significant projects for PGMs. K4 which is an unrivaled PGM Brownfields project will target both Merensky and U2 Reefs.
We say it's unrivaled because the bulk of the infrastructure is already in place. This includes functional vertical shafts, a functional 130 kiloton concentrator, surface infrastructure which includes offices, change houses, grout plants and refrigeration plant and many more. Underground shaft stations and cross cuts are in place as well as shaft bottom development. You must also note that infrastructure development already started in some of these levels. In terms of the project, I'm glad to say that the project team and the EPCM are on board.
Infrastructure and mining early development already commenced and this will be a major focus over the next 9 months. It's also important to note that we already have an operational management team in place, which will not only assist the project, but will also ensure a smooth transition into the mining activities, which will already start as early as quarter 2, 2022. Most of the designs are on track to be finalized and with quite a large focus on ESG friendly solutions. With the 5th year life, it is clear that K4 will play a significant role in the region by ensuring sustainability for the Maricano operations. It will also play a significant role in the local economy by creating close to 4,400 jobs and also creating opportunities for local procurement, SMME development and skills transfer.
With the 50 year life, K4 is a top Tier 1 project with a very low capital intensity of only around R350 before reals. The bulk of the R4 1,000,000,000 project capital will be spent over the next 3 years and that would be spent on ensuring the completion of the surface infrastructure, completion and modification of the shafts and conveyances as well as the infrastructure development that will ensure commercial production. K4 should reach steady state production by 2,030 by producing around 250,000 ounces over a life of at least 33 years and producing at a very low operating cost of only around ZAR16000 before the ounce. In total, 11,500,000 ounces will be mined over the 50 year life. With the commodity price and exchange rate assumptions shown here, which equates to about just above ZAR24000 above 4 year basket, a 6 year payback is expected.
Thus ensure superior return on investment of ZAR3 1,000,000,000 net present value and internal rate of return of 33%. So if I move on to the next project which is significant albeit far smaller is the Klipp von Teign shallow open pit PGM project. This is a joint venture with Anglo American under the current pool and share arrangement. Unit 2 will be mined up to a depth of around 45 meters. I'm glad to say that the Section 102 approval was received by the DMRE, so the project is now ready for execution.
The $66,000,000 project capital will ensure that $37,004 ounces per annum will be produced from 2022 until 2024 at an average operating cost of just above R8,700 per for re ounce. A total of just above 118,040 ounces will be produced. This will result in a net present value of R740,000,000 dollars and a very good internal rate of return of 70%. This project will also contribute to the regional and economic benefits by creating 174 jobs. The contractor will source labor from the local communities.
We will also create procurement and SMME development opportunities. Rehabilitation agricultural farm status will happen at the end of the project. It must be noted that rehabilitation will happen concurrently with mining, which means by the time when the mining is completed 80% of the rehabilitation already would have been completed. Thank you. With this, I hand over to Jevan and the rest of the sustainability team.
Thanks very much, Rob. My name is Jevon Martin and I'm responsible for energy and decarbonization within the group. It gives me great pleasure today deep dive into our energy and decarbonization strategy for SAP GM operations. The SAP GM operations account for 39% of our group energy demand. Due to the infrastructure and extensive conventional mining methods, Energy electricity is the predominant form of electricity and as a result creates a very unique emissions profile with 97% of the emissions stem from Eskom coal fired and diesel fired electricity.
It's anticipated that this emission profile will decline over time as in line with our PGM production profile as well as when the renewable energy increases in terms of the national energy mix. We, however, have a number of active decarbonizations currently underway. Similarly to our South African gold operations, we have advanced energy management practices being implemented within these operations, which last year results in 60,000 tonnes of greenhouse gas emissions being avoided, primarily through the deployments of digital twins as well as uniquely developing an energy culture. Due to the emissions profile, one of the strongest levers that we can pull is the deployment of renewable energy. And I'll talk to our solar PV project shortly.
But I previously mentioned our wind energy projects, which will enable rapid decarbonization of these particular operations. In terms of the remnant diesel that's used at our mechanized operations, we're exploring the use of battery electric vehicles as well as setting Scope 3 targets for those emissions that are occurred through the 3rd party processing of our concentrate. Electricity will continue to remain the focus at this operation, so given its predominance in terms of emissions. If I talk quickly to our solar PV projects, given our expanded footprint in the Northwest, we undertook initially a pre feasibility study and then later a feasibility study into embedded solar PV generation directly into our operations. The studies confirm the strong rationale around deploying these projects given its decarbonization and commercial potential.
The long life assets as well as the associated demand can support easily up to 175 Megawatts of Solar PV across 3 specific sites, an 80 Megawatt project located within the RPM complex, specifically between Batapeli Mine and the UD2 in retrofit concentrated. A 65 Megawatt project that will be co located next to Korea complex that will supply the K4 shaft, the K4 concentrator, the K3 shaft as well as the K3 concentrator. And lastly, on the eastern portion of our footprint, a 30 megawatt project that will directly inject power into the Rowland smelter. The assessment included extensive land study that confirmed that we have available Sibanye land that can accommodate solar PV. And there were no critical flaws in terms of engineering, environmental, geotechnical, regulatory, social or security aspects.
We also confirmed that we have adequate substations that will allow the solar PV projects to be directly interconnected into our operations. The total cost of the projects will be in the order of DKK2.5 billion to DKK2.8 billion that will be funded through third party PPA structures. This results in us having minimal capital outlay accessible to access to renewable energy at a 30% to 50% discount to grid supplied electricity from day 1. This generates a significant NPV for these operations as well as has a significant decarbonization potential and anticipation of pending carbon taxes for Scope 2 will also offset these liabilities. We're currently targeting financial close in the first half of twenty twenty three with commercial operation in early 2025.
The project schedule is currently being driven by the permitting activities, of which the environmental impact assessment, the rezoning and the subdivision of land have already been initiated. I'll now hand over to Grant, who will take us through the balance of our environmental considerations. Thank you.
Thanks, Kevin, and good afternoon and pleased to be with you all. I'm Grant Stewart, an SVP for Environment as part of our sustainability and ESG focus. Our closure vision for the SA PGIM operations is an agreed safe, stable, regional post closure mining solution that will deliver clean water to local and regional catchments, enabling sustainable post mining economies and ecosystems. Critical to the success is going to be meaningful stakeholder engagement and collaboration. We are guided by our ESG policy where we make specific reference to the following: design and implement a closure plan that incorporates concurrent rehabilitation and post mining land uses in conversation with local communities and government.
And a group position paper that states on sorry, on post mining socioeconomic sustainability and closure, which sets out our approach towards planning and execution of an integrated responsible mine closure where latent and residual liabilities are well defined and provided for. Integral to aligning to the closure vision of the remaining life of the mine is concurrent rehabilitation. As of 2020, we own some 17,000 hectares of land around our SAP Dream operations. We have evolved a footprint reduction program as part of our concurrent rehabilitation drive to sustainably close mining impacts, a vital component of reducing our closure liability. As part of this program, a simple example are the before and after pictures that you can see on the right hand side of your screen, where we have successfully concluded the demolition of the Tlemontane concentrator with rehabilitation of the service area reducing our closure liability by some ZAR40 1,000,000.
This is a good example of our collaboration with local communities can achieve a desired outcome with local skills development and deployment, a peripheral benefit. Moreover, we are also looking to leverage our equity interest in DRD Gold and extend the successful tailings retreatment and reclamation and environmental cleanup into our SA PDM operations. Another opportunity that we have well advanced in consultation with the regulator is the opportunity to backfill old pits with tailings. The Morikana pits and West West pits currently have a liability of some ZAR1 1,000,000,000. Deposition into these pits will not only see the ZAR1 1,000,000,000 closure liability reduced substantially but will provide an end land use that does not pose a risk to environmental community.
An international and independent third party is commissioned on an annual basis to align our closure plans and rehabilitation obligations with the requirements of DNR-eleven forty seven for submission to the Department of Mineral Energy and Resources. A closure report per operation is completed and includes the unscheduled and scheduled closure costs for each mining operation at site level. This report is used for external auditing purpose and eventually for submission to the DMRE. We have set aside some ZAR4.7 billion, which is the unscheduled closure liability for the management remediation and rehabilitation of the environmental impact on our ESA FE Geopin footprint. These are independently reviewed and adjusted annually as mining occurs and as mining plans develop.
The unscheduled closure liability of Marikana with a life of some 20 years plus is some ZAR1.9 billion with kronedar and SRPM ZAR1.4 billion and ZAR1.2 billion, respectively. The unscheduled liability is funded through a combination of trust and guarantees or cash in trust and guarantees, and the cash contributions are made annually to a dedicated rehabilitation trust over the planned life of the operations. Any shortfalls and closure provisions at the end of the period are funded by guarantees. These provisions serve to assure the DMRE that the mine will enable or be enabled to fund the rehabilitation and costs in accordance with our closure plan. Thanks.
Since 1965, there have been some 120 reported failures of tailings facilities with some 2,300 fatalities and significant environmental damage. Substantial advancements have ever been made in the past decade in technologies and engineering practices in design, assessment and management of tailings storage facilities. We are very cognizant of our obligations to ensure that we mine responsibly and minimize our harm to the planet. This is very evident when it comes to the way we manage tailings and hence, our very strong group tailings governance framework. As a member of the ICMN, we are committed to implementing a group tailings management system in alignment with the group industry standard for tailings management.
The global standard stipulates increased accountability to owners with an elevation of accountability to the Board and Executive Committee. Further, we have committed to comply with all the requirements of the global standard by the 5th August 2023. The SAP GM operations have 23 tailings storage facilities, of which 21 are classified as having a high hazard rating in accordance with SANS 10286. 24% of these facilities are dormant, 2 of which are classified as having a need and 2 of which are classified as having a medium hazard. We intend to be fully compliant by 2023 to all TSFs regardless of the classification.
We are in the process of confirming the classification of all facilities in alignment with the global standard consequence classification matrix. We have added a tailings module to our Pivot platform, which is a management reporting tool. And any normal conformance against the Group Tailings Management Standard or Global Industry Standard Conformance Roadmap are identified, tracked, managed and closed out. The establishment of the SAP GEM Tailings Working Group has raised risk awareness and created greater TSF management understanding in the operating entities. A good working relationship has encouraged operating entities to escalate tailings issues to the VP tailings engineering for resolution.
Outstanding matters are now receiving a higher level of tension reducing overall tailings risk. During the balance of this year, we'll be rolling out an internationally recognized best practice tailings management technology currently used by 4 members of the ICMM, including Rio Tinto. This technology will enable improved and proactive risk identification, management and mitigation across the PGEM footprint. The module will include deformation monitoring and side slopes by satellite. All data points are geo referenced, aligned for integration of environmental and social data, providing additional business opportunities for managing and reporting against our ESG requirements.
Implementation of this module will assist in closing several gaps with the GISTM requirements. Thanks. Our Marekana, Rustenburg and Crunda operations are located in an area which is recognized as water constrained area. The operations are dependent on Rand Water Board, the Rustenburg Rustenburg Local Municipality and Rustenburg Water Services for approximately 65% of their total water demand. With the growing demand for water in the region due to a due to a growing population, a backlog of augmentation and water security schemes by local authorities and unpredictable weather patterns, it is important more so than ever before to design and implement measures to improve the water security for production purposes.
Through effective implementation of such measures, we will reduce our impact on surrounding water resource and improve water security in the region over the longer term for the benefit of our operations, those who depend on operations as well as the surrounding communities. Securing and protecting local water resources will also serve the region post the closure of the operations. We are therefore focused on our water security strategy to secure and sustain safe operations. There are a number of focus areas that drive our security strategy, one of which is the effective and smart continuous monitoring. The Flow technology that we have decentralized across all of our sites enables a defined and consistent approach to the site level accounting, which is fundamental to adequately capturing a diverse range of operational contexts, audit practices, risks, opportunities and management responses, which occur across our operational footprint.
This technology is the foundation for accurate and consistent external reporting for the minimum commitments. Since this implementation of this technology since the implementation of this technology in 2016, we've expanded the system to include more than 400 monitoring sites across our operations. Through the successful implementation of this strategy, we have managed to reduce our reliance on the integrated Vol River system by some 18% in 2020 when compared to 2018. Other demonstrable progress in water security strategies include the integrated Marikana water balance across our SAPGM footprint, which has introduced a great deal of flexibility and enabled the water to be transferred from the water rich areas during the wet season to storage areas and water areas known to be water stressed. The Padora pipeline scheme has enabled the Murray Can operations to transport up to 6 megiliters of water a day from the east and wet operations to the Korea operations.
Order harvesting, this has allowed us to access more than 1,000 Megaliters of capacity through the utilization of old open cost pits and cleaning up the process water dams. This 1,000 Megaliters is able to sustain the SAP GEM operations for more than 2 weeks without any other potable water supply. A focus on tailings and density management and control with a target of 1.6 tonnes per cube by 2025, that is an optimal tailings density management and maintenance of our tailings facility that we are aiming to achieve. We recognize the fact that more than 50% of the water lost at the tailings facility due to seepage evaporation and initial interstitial lockup is a critical success factor to our water security strategy. As part of our drive to water security and water independence and responsible water management, we have also climbed on board and have a clear target and support transparent disclosure, which is why we have also reported and joined the water reporting to the CDP.
But as we all know, that meaningful change can only happen through collaboration. So Tabasilia, over to you.
Thank you, Grant. My name is Tafsile Pumo. I'm Head of Stakeholder Relations and Community Development. As a company, we are making real changes to transform and create value for all our stakeholders. Reflecting on empowerment structures.
At Marie Ghana, we've had to restructure the empowerment structure because the previous one was non beneficial and had substantial debt burden. The new sustainable BEE financing structure provides for immediate access to distributable cash flow and ongoing transfer of tangible value to the beneficiaries. This enables us to secure the social license to operate for these operations. We recognize the need for social relief. And to that extent, we have unlocked it via our BE structures and employee profit share scheme.
We are pleased to advise that we have paid DKK 145,000,000 to the Rustenburg BE Structure and BRL64,000,000 to employees via the profit share scheme since the acquisition. In Marikana, we've paid BRL 91,000,000 to the empowerment structures and BRL 521,000,000 to Marikana employees via the ESOP for the 2020 year. It is important that we continue to invest in this operations so that we can increase their life of mine and also secure jobs. To that extent, at steady state, K4 and Kif Fontaine will employ 4,500 people at steady state. We continue to contribute to the fiscus and social imperatives by paying royalties and taxes.
And in the first half of twenty twenty one, we have paid ZAR 10,300,000,000. We continue to deliver on social and labor plan programs for each of the mining licenses. Our employee volunteering scheme where we partner with our employees to unlock value ensures that we continue to create value in areas where they live. We also continue to sponsor universities, bursaries and provide for learnerships for the youth in all our operating environment. Across the PGM segment, we have contributed to close to 80 social and labor programs in the areas of skills development, infrastructure development and income generating projects.
In the health sector, we have partnered with the Northwest province Department of Health to improve health services. And in this case, we are involved in the construction of clinics, forensic mortuaries, and we have also contributed mobile clinics so that they can access areas that are far from social services. In the areas of education, we have partnered with the Northwest Basic Department of Education where we have rolled out early childhood development programs comprising the upgrade of facilities, teacher training, learning infrastructure and material. We have constructed new schools and continue to be involved in the extensions of several schools so that we can improve the quality of learning. The key issue that everyone is engaging around in Marikana is what we have launched earlier in the year, which is called the Marikana Renewal.
The Marikana Renewal focuses on honoring, engaging and creating a new reality in Marigana in partnership with stakeholders so that we can ensure that we honor the legacy of Marigana and facilitate healing for families and the injured. We pursue justice and restitution for the affected and impacted. It became evident when we are working on this aspect that you cannot do healing and restitution without looking at issues of social redress. To that extent, we are working together with various partners, government included, to ensure social redress through the delivery of social infrastructure that benefits communities. We are one of the contributors to the district development model and continue to promote together with other stakeholders the development of alternative economic streams in the region that can continue to create jobs during and post the life of mine of our operations.
And that is how, as a company, we are creating superior value for stakeholders in the Northwest environment. Over to you, Richard.
Thank you very much, Tebacile and also to David and the rest of the team for those extensive presentations and deep dive into our operations. I think to bring it all to a conclusion, and certainly it is not my intention to repeat a lot of what has been said, But just to zoom through some of the key points that hopefully you have been left with from the discussions today. These are quality world class assets. They are contiguous in nature, which has really allowed us to realize and achieve the synergies that we set out to achieve and has reset the cost base of these operations. They are competitive second and third cost quartile operations, which has set them up well for downturn period of the PGM markets, where it was difficult to justify capital, they have the resource base to sustain not only current production, but the production that the market requires for an extended period of time.
And we are developing the strategies as to how best and most responsibly realize that value and long life for the value of all of our stakeholders. We have a very competitive position in terms of the processing capacity that we have. We have spare capacity in our refining facilities and that certainly provides optionality not only to assist third parties, but also in terms of our own growth plans. Many of our capital projects do not require extensive capital to be spent on processing. Similarly, as we mentioned, our strategy has been very much about integrating our business with our customers, with our supply chains.
Likewise, as you have heard today, we very much focus on integrating our business with the surrounding communities in which we operate and the environment within which our mines are created, ultimately with an objective of leaving a legacy when we leave one day that is better than when we started. I think we've demonstrated that we managed to very successfully execute our entry into the PGMs to execute our growth strategy. We have already created significant value for our stakeholders through these operations and look forward to continuing to do so for a further 20 years to come. And with that, once again, thank you to the team for the presentations, and we would look forward to taking any questions that you may have. Thank you.
Thanks, Richard, Darby and Roderick. Thanks for that. We do have a number of questions. We've got fairly limited time, so I'll try and get through as many of them in the time available as I can. First of all, I think for Richard, I'll put 2 together here.
There's a question from Dominic O'Kane about our reserve profile. Has Marikane and Rustenburg roughly flat until 2025. The question is that given the current reserve price being below spot at the moment, is there elasticity to increase output at Marikane and Rustenburg without significant new growth capital? And then in the same sort of vein from Chris Nicholson is do any of the potential projects on Slide 12 meet your hurdle rates under the long time price assumption set? [SPEAKER STEPHEN
ROBERT BINNIE:] Thanks, James, and thanks, Dom and Chris. Yes, listen, I think in terms of the sorry, getting rid of feedback. In terms of the elasticity question, I think importantly, where our underground operations are at the moment, those are fairly stable grade profiles and really changes in prices do not significantly impact the ability to increase output without capital growth. Of course, we do have extensions to many of those that don't require significant growth, but it's not so much a price question. On our surface operations, which are more sensitive, increases in prices do allow us to tweak and optimize our surface output a little bit.
I think in terms of the I almost want to call it the capital strategy with the projects, which perhaps is to some extent where Chris is going. The short answer, Chris, is yes, most of those projects meet our hurdle rates at our own reserve prices and of course at spot prices very comfortably. But as I mentioned in the conclusion, for us, how to where to spend capital, the rate at which we spend capital, the projects that we invest in, I think is very much driven by our long term view of the markets and what the markets are going to require, including the metal mixes that are going to be required. So while I demonstrated that we've got plenty of projects to be able to maintain our current profile if that was what we wanted to do and arguably grow it if that's what we wanted to do. The actual decision to invest is not just about meeting a hurdle rate, but really about strategically considering what we think the markets are going to need for the next 5, 10 15 years out.
And ultimately, that will drive our capital allocation framework. Thanks.
Thanks, Richard. The next two questions, I'll ask Neil to answer, if you could. First from Wade Napier. With the consolidated SA Industry, with no one carrying any debt on their balance with no one carrying any debt on their balance sheet, where is the disincentive for producers not to green light one too many of these projects? And then in a similar vein, when do you start approving new projects or spending capital to keep the production profile roughly flat to the end of the decade?
Neil, could you respond to those, please?
Yes, certainly, Wade. I think Richard basically provided the answer. I think those producers that are responsible will remember the oversupply situation of just a few years back, and it's not smart to produce more just to be a bigger producer. That's point number 1. I think when we talk hurdle rates, that's one thing.
Making an investment in a country that is not going in the right direction requires another level of decision making. So although and we've it often and we've said it publicly as well that we've got many projects that under normal circumstances would be good projects, provide good returns. But we cannot with hand on heart commit to those projects under the current conditions in South Africa. We need more economic reform. We need stable electricity.
We are moving in that direction. And when some of those stars align, it can be much more significant investment. But again, the market
is going
to dictate how much supply we bring on to the market. If we see a shortage, we'll certainly do it because we value our customers. But just to produce more to be bigger is not smart. So thanks, James. I think I answered all those questions.
Yes, I think so, Neil. The second one was just about when we'd approve projects, to keep that profile flat, but I think you've pretty much answered that. The next one is relating to Kroon Dahl. There are 2 questions that I'll ask Richard Kroendale life of mine, 11 years per the slide that you presented, Richard, the reserves and resources. But planned ounces and cost slide that Darby showed shows essentially no output beyond 2025.
Why is this? And then from Dalman Road, metal focus, given the industry trend of allocating capital to shallower, more mechanized operations, can you talk to how you view the priority of a Krueyndal life of mine extension project relative to other deeper conventional mining projects in our portfolio.
Richard?
Thanks, James, and thanks, Nkatego and Dale for those questions. So I mean, I think just to address the graphs, what we saw in the second graph that Davy presented was very much what our current reserve base is that
underpins our reserve base in terms of it has a
cut off because of a tail. Presented actually was a slight tail that exists. Without modifying operation, that tail on a stand alone basis would not currently be economic. However, I dare say when we look at the Kroondal operations, the fact that they are contiguous to Rustenburg, there is still significant opportunity to realize value and extend the life of those operations by dropping the boundaries between what is classically been known as Kroendale and the Rustenburg operations. Obviously, that is something we are in a partnership at the moment with Anglo, and we will continue to explore the optimal way to develop those assets going forward, such that it can extend the life.
And I think that goes to the heart of the point I mentioned, that we have not yet optimized the value out of these assets. And certainly, with further refinement around dropping boundaries and optimizing infrastructure, I think there's still significant potential and value that can be had for all stakeholders there. I think in terms of the question regarding the priorities of cell surface mechanized versus underground conventional. Look, again, I think it just comes back to the same capital question that we've been debating in the last few questions. Ultimately, brownfields expansions, we will look at much of that doesn't require significant project capital, so they are just extensions to existing mines, and we'll look at optimal ways of doing that.
And anything that requires significant capital will be reviewed, as we just discussed in the last questions, both around hurdle rates, market requirements and of course, as Neil mentioned, looking at the climate within which we're investing. Thanks, James.
Thanks, Richard. The next two questions are similar from Steve Shepherd and Chris Nicholson again. Chris has been very active today. How much longer do we expect to have to make use of Amplatz's smelting, converting and refining assets? Is it commercially sensible to go it alone?
And then Chris' question was, you say BMR and PMR are currently operating at 50% utilization. Are you still considering canceling the toll on Rustenburg with Amplatz and processing these ounces yourselves? What other options do you have to utilize the capacity, I. E, Ivan Platts recycling and other parks?
Richard? Thanks, Chris and Steve. Look, I think a lot of questions there, which to be honest, I'm not going to delve into in a huge amount of detail because clearly those are quite strategic questions. But what I will say is that obviously the contract that we have in terms of the toll processing with Amplatz at the moment was initially set up as a 10 year contract when we concluded the transaction. So that goes off until 2026 and can be extended by both parties at the time, if that's what we want.
Where we are at the moment is that As mentioned As mentioned, I think we're probably one of the few parties in the industry at the moment that has got spare refining capacity, especially on the base metal side, which gives us flexibility with regards to our own projects. It gives us flexibility to assist third parties. And then of course, there is obviously the flexibility by having some of our material going through 2 facilities. As we know, there are challenges with Eskom. That is not a risk that we currently face on the Rustenburg side.
And having that flexibility, listen, is a big risk mitigator for us. So there's several different aspects to this question. And I think at the moment from our side, it's a level of flexibility that we enjoy having and that I think we will retain for now and evaluate what the optimal route forward would be for when the contract comes to an end.
Thanks, Richard. The next question from Arnold, do we have plans to reopen Baobab or Blue Ridge? I think we pretty much answered that in terms of the other projects. These would obviously fall quite far in the back of the queue. So maybe we'll let some of our peers who are looking for answers open them up at another point.
But think we've already responded to that, Arnold. Steve Shepherd, a question for Davie. Have you evaluated your surface dumps in the Rustenburg Marikana region? If so, what is your thinking regarding their possible exploitation? Javi?
Thank you, James, and thank you, Steve. I think like I mentioned in my presentation that we are busy assessing all our surface dump areas and yes, there is definitely opportunity for increase in output. I think further to that, it also brings about 2 other opportunities, which will show us a potential saving in terms of CapEx on TSF and further maximizing our current surface operations where we will definitely see a reduction in terms of unit cost ramped on those. So yes, there is definitely opportunities. Thank you.
Thanks, Davy. Next question, I think for Rodrik, Arnold van Kran. How do you intend keeping operating cost in AISC flat once production starts to decline as per Slide 16?
Rodrik? Okay. Thanks, Anode. The way we have actually modeled our life of mine, Anode, is that all those expensive shafts that we are actually going to drop will be leveraged by basically by the less expensive shafts. The shops that we are talking about here is Cipumelele, if you look at the life of mine, they've got a shorter sort of life of mine.
And then where it drops, basically, the less expensive shafts actually coming in. And on top of that, you'll pick up that Noah, when we actually close that particular shaft, fix over as we assume that those costs has to go. The only cost that most probably will actually be minimal is actually the head office costs where you pick up a very small percentage. So that is a leverage between basically your lesser sort of like expensive shafts versus basically the mechanized shafts that are coming actually at a lower cost. So that is basically where you'll see that your unit cost will remain flat.
You will have expected the profile is the same, then that unit cost will actually go up. And on the same time, you'll actually realize that our disc cost that we are showing here, they are actually exclusive of basically the inflation. So it's actually on real cost. So that's basically where we are on that profile. And then if you compare it with basically the surface, you could see that now the surface has got a different sort of like a tariff, which is basically going the other way.
That's basically what has happened on that particular one.
Thanks, Roderick. The next question from Chris Nicholson again is how much CapEx is required to meet the new sulfur dioxide emissions regulations of 1,000 and I can't remember if it's milligrams per Nm squared, we'll just leave it at that, by 2025. Is it in your CapEx profile on Slide 19? Grant, Stuart, could you maybe answer that one? Is Grant available or maybe Kevin Robertson?
I'm here. Can you hear me now, James? Thanks. Of course, sulfur dioxide is one of the greenhouse gases that we as responsible miners need to manage and fight the good global warming fight. As Darby mentioned, we are already compliant to that local legislative limit of 1,000 milligrams per cubic meter.
But we've also set some internal benchmark targets that we need to do in order to sit alongside our benchmark U. S. Colleagues. The target is really to improve our SO2 capturing and cleaning efficiency from 80% to 90% by 27% and then by 99% by 2,030. Those are the subject of a pre feasibility, which is looking to really test the logical and most cost effective outcome.
The pre feasibility will be finished by the end of the middle of next year and then we'll following a successful outcome then embark on the feasibility study. Thanks, James.
Thanks, Grant. The next question from Pearson Muroodi from AFRI Foresight about whether K4 will be mechanized or conventional. I think from the slides that Rolf presented, Pearson, you would have seen that there would be about 4,500 jobs created. It's similar to the existing Marikana other shafts, which are conventional. So it will be a conventional mine.
Then from Nkateco at Investec again, can you update the capital expenditure profile for processing infrastructure and asset reliability? Piers are increasing stay in business spend on processing infrastructure. Is SAP GEM also experiencing the same CapEx demands? Kevin, I'm not sure if you're available to answer that one. Kevin Robertson?
Yes. Again, yes, we have. We actually picked our peak funding is in 2023. And this includes obviously the compliance, the structure in our processing environment. On the concentrated environment, again, it's just SIB capital and they are pretty at steady state and in very good NIC as well.
So it's just on the processing side that we have increased our capital and as I said, fixed in 2023.
Thanks, Kevin. Appreciate that. Arnold von Kran again. A question for Roderick, I think. The big difference between contractor cost components at Rustenburg versus Marikane?
Is this something that will normalize over time?
Thanks, Thanks so much. You will recall that now on the Rustenburg, we've got that Rustenburg operations, we do have mechanized and also the conventional shafts. And mechanized sections are actually at Watopili shafts, whereby we are actually utilizing Epiroc as one of our actually contractor that is actually maintaining our fleet at Batupili. That's why we'll pick up that the RASMVEG operations contract costs are quite higher than actually the rest. So and that is actually quite expensive maintenance.
You will recall that, Noah, the mechanized section, when it gets to contractors' costs, are actually slightly higher with less labor. So that is where the mix is comparable to basically where Marikana is sitting at the moment. The only contracts that we have got there is actually for vamping and shippings only, which is basically normal. That's where the differences are in terms of the contract cost between the mechanized as well as the conventional HD shops. So yes, but in terms of normalizing it going forward, it's 2 different sets of actually mining methods that the guys are actually doing there.
So it couldn't be normalized because Batu Pilli is purely mechanized and the other one is conventional.
Thanks, Roderick. Just a last question then before we take a quick break was around the CapEx guidance in the slide or the slide shows SEK6 billion for 2021 versus SEK3.9 billion that we guided for in our results. Could we just explain the difference in the slide versus the guidance that we've given in the book?
On the graph that we are actually seeing there, we are using a life of mine as per the plan, original plan that we had. And that was actually including the K4 and then also the Open Cast original plan as we had it and a couple of the refineries and the PMR CapEx that we had originally on the life of man plan. But due to delays in terms of COVID, when we get to actually the year, found that some of the actually CapEx has been delayed, but this can actually be spent next year. So you could pick up that now while a lot more has been moved basically to 2022 in terms of how we actually are pushing our CapEx. So that is basically the only differences between where we are at ZAR6 1,000,000,000 down basically to ZAR4 1,000,000,000.
So that is basically that time delay of the projects as well. And then the last one is basically more sitting on the ORD side as well, which is basically on an expense basis at this point in time when you look at the graph.
Dominic, if you want to go into a bit more detail, we're happy to take it offline and go through the numbers with you as well. On that note, I think let's take a quick break. We've got the last session ahead of us, so we'll come back in about 6 minutes, and then we'll start the final session of the day. Thanks very much for attending so far.
Good afternoon and welcome back to the last session of the day where we'll be looking at our U. S. Or Montana Stillwater operations. And again, truly a Tier 1 asset that in many ways is a big differentiator for our PGM business. As per previous, please take note of the forward looking statements and safe harbor statements.
Thank you. So, I think when we consider global PGM markets and where PGMs are produced, they largely come from 3 operating districts, Southern Africa, being South Africa and Zimbabwe, Russia and North America, most of which comes from the United States from Stillwater itself. Clearly, each of these countries have got their own political and geopolitical risk. And certainly, having the opportunity to have a diversified asset base that considers Southern Africa and the U. S.
Is unique in terms of the opportunities that having such a base presents. And we will share some of those opportunities with you as we move through the presentation. But this was a very strategic addition to our PGM portfolio in the form of Stillwater. The operation itself is an outstanding deposit. As you can see from the picture at the bottom, currently to date, less than a third of the or less than half of the total operation currently sits within our reserve base.
Just over a third has actually been mined. And there is still extensive known resources that could be exploited for many years still to come. So, looking at the Stillwater acquisition itself, this was made in May of 2017. It was a big acquisition for our company at the time and certainly did raise some eyebrows. But this is truly a world class operation.
It is by far the largest primary palladium producer in the world, one of only 2 and significantly larger than any others. It is a long life asset base, which we will share with you. And also equally important, this particular acquisition came with the recycling business that came with Stillwater, which is a very strategic business, especially when we look forward into world of ESG and green metals. And we will share with you how recycled metals is substantial from a green perspective and really provides a lot of flexibility to our market, to what we can offer our metals to our markets and to our customers. Of course, the U.
S. Is a stable mining jurisdiction and has a different operating cost base, all of which provides us with flexibility and strategic advantage when looking at our total PGM operating base. You will see the capital that we have invested in this project and that is for the long term investment that will ultimately make this one of the lowest cost producers in the industry, a 1st quartile cost producer. And of course, Stillwater is one of the leading ESG operations, I would say, globally. Many of their practices, I think, set the benchmark, not only within the PGM industry, but within the global mining industry.
And many of the processes and initiatives that have been embedded such as the Good Neighbor Agreement certainly serve as a guiding beacon for much of the industry across the rest of the globe and one we are looking to embed within the rest of our operating businesses. Thank you. These are long life assets as I mentioned. The total resource base is about 87,000,000 ounces. We have increased that slightly as we have expanded towards the east of the deposit in the so called blitz area or Stillwater East area as we refer to it.
Our total reserve base is only 27,000,000 ounces. So as highlighted, still a significant portion of the ore body that remains available to consider in the future. Thank you. I think the next slide really just outlines what is significant and special ore body this is, particularly from a grade perspective. Anybody who has mined high grade ore bodies would know the benefit that it brings to you in terms of the flexibility of operating during tough times when putting prices on the press and certainly the flexibility it gives you as well to manage yourself on a unit cost basis, unit cost per ounce basis.
And this really is a standout operation relative to any other PGM deposit across the Dope. The life of mine, as we know, we acquired Stillwater with a solid and stable operating base at our East Bolder and Stillwater West operating areas. They are indicated by the gold and red lines on this graph. And these had steady life of mine at a total of about 550,000 ounces per year over a period in excess of 20 years. When we acquired the operation, there had been a scoping study and this commencement of a pre feasibility study on a project known as Blitz.
Today, we often refer to that as the Stormwater East area and that is shown in blue. It's a project we continued with, subsequently completed a full feasibility study on, and that project will see these operations ramp up to around 850,000 ounces in total for more than a 20 year period. Thank you. I think on top of that, again, just to touch on the recycling, the recycling base adds an additional 800,000 ounces of production, albeit secondary production to these operations. That is a substantial 1,500,000 ounce production that we have coming out of the U.
S, a strategic location, the only producer of PGMs within the U. S. And certainly an asset that is deemed to be very strategic globally. I think just moving on what you'll hear throughout a lot of the presentation today is looking forward as to how we see these operations, how we see blitz or Stillwater East coming online, how we see the buildup in flexibility at our Stillwater West operations and the continued steady state of East Boulder, which has been a steady producer for us over the years. So I'd almost like to just take this opportunity to briefly reflect back.
Neil has shared some of the payback periods on our operations. But just to briefly reflect back, we will look forward, but where have we come from with this operation? As I mentioned, we paid $2,200,000,000 for this asset back in 2017. Fairly shortly thereafter, we did undertake a streaming transaction with Wheaton Precious Metals. That has been a partnership we have greatly valued and has added a lot of value to both parties, but that brought in an additional $500,000,000 worth of funding.
These operations together over the period of time that we've owned them have generated just under $1,000,000,000 in cash, of which we have reinvested about 600,000,000 dollars into capital, a portion of which has of course gone into the Blitz or Stillwater East project. As it stands today, we have just shy of $1,000,000,000 worth of advances in the recycling business. And to try and cut through what that means, basically it means that if we were to stop operations and stop our business today, we would have $1,000,000,000 worth of cash flow that would still come into the business. Looking at that, that largely means we have already paid back what we paid for the Stillwater operations just over the last 4 years. Small amount outstanding there, about $350,000,000 which subject that coming back, we have broken even already on the significant investment that we made.
So everything you will see in the slides coming up, the look forward, the opportunities that we have to further reduce our costs, the long life nature of these assets, that will all be additional value that we have created for our shareholder base and look forward to creating and enhancing the value for all our stakeholders with the long life of this asset. Thank you very much. I'll now hand over to Wayne, the EVP of the U. S. Operations and his team to take us through the details.
Thank you, Wayne.
Thanks, Rich, and good morning and afternoon to everybody on the call. For those of you who don't know me, my name is Wayne Robinson, and I've been heading up the U. S. Segment since the beginning of the year. Rich has already covered some of the key highlights of the US PGM business and what I'm going to do is run through a bit more of a detailed overview of the operations, covering aspects from safety through to production and I'll also be giving some costs and financial forecasts and then also provide a bit of an update on the Blitz project, which we now refer to as the Stillwater East project.
As you've seen from the photos, these operations are based in a pristine environment in the foothills of the Beartooth Mountain Range. We've got 2 operating mines, the Slowwater mine, which has been in operation since 1986 and then the East Boulder mine, which started in 2,002. And these operations produce around 300,000,250,000 ounces of 2E output, respectively. The Stillwater East project, which was initiated in 2016 prior to the acquisition by Sibanye Stillwater, targeted an additional 300,000 ounces of TUI production, which would have grown total underground output to about 850,000 ounces by 20 22. Following a review in 2020, buildup has been revised to the end of 2024 and I'll provide a bit more detail on the rebased plan in the coming slides.
Each of these mines has a dedicated concentrator and tailings facilities and concentrate is trucked to the metallurgical complex in Columbus from the mine sites. In addition to being a world class metallurgical function, this facility is also one of the largest order cat recyclers in the world, with output able to match the 850,000 ounce underground production. The nature of our environment and the surrounding communities compels us to be a leader in terms of our ESG practices and we'll cover this in a bit more detail later. Unfortunately, not all the members of my team will be presenting today. So I'd like to quickly introduce them.
I've inherited a very strong and experienced team who have a great understanding of operations and the operating environment in North America. Dee Bray heads up the safety for the segment and Dee has deep operating experience from the slowwater operations. He spent many years at these mines and a key focus for him and his team is achieving ISO 45,000 compliance by year end. Ryan Morris, he's worked for the U. S.
Operations since graduating and his focus as Head of HR is ensuring we have people who are engaged in our business and more recently, he's dealing with the challenge of ensuring we've got critical skills to grow the business in a very tight U. S. Labor market. You'll also hear from Heather McDowell a bit later when she shares our approach to ESG. Her portfolio is quite diverse and also includes legal and governmental affairs.
Kone Streatham was brought into the team earlier this year as an additional resource to provide technical support as well as project management support to the Stillwater East project. Until recently, I think you'd probably be aware that he was heading up the SA Gold operations. I believe most of you know Justin Froinemann, who has been ably supporting the team as a CFO for the U. S. Operations for the last few years.
He'll also be sharing a bit more detail on our costs and give a detailed update on the recycling business. Ken Kluckstahl has been the SVP of Operations for a number of years and he also provides extensive experience in this operating environment as well as a high level of energy to the team. So despite an improving trend over
the long
term, the team continues to strive for safety metrics which are comparable with those of our peers in the ICMM. Delivery against the pillars of our group safety strategy, which was presented in a lot more detail on the month of September, will support continuing improvements in this trend in the short term. A notable setback in our safety journey was the tragic incident at the slaughter mine in June 2021, when a small utility vehicle collided with a train on one of our main rail levels, resulting in a double fatality. Aside from the significant emotional impact on the entire workforce, the operations were disrupted by suspension of all operating activity by the Mine Health and Safety Administration. There were also subsequent short and medium term impacts on production as operating procedures were revised and the U.
S. Segment continuously looks at new systems and technologies to create a more enabled environment. I'd like to share 3 key takeaways from this slide. Firstly, operations will build up to 800 and 50,000 ounces of TUE PGM production by 2025. There is a decline in production from Stillwater West in 2021 2022 and this then resumes to planned levels by 2023.
The Stillwater East project also reaches optimal production rates by the end of 2024. And as I've said, by 2025, we expect to experience the full benefit of this growth in output together with the finalization of the expenditure on the project. The completion of the project and the growth CapEx by 2025 results in a convergence of the all in cost and all in sustaining costs and this then reduces total operating costs together with associated lower planned stay in business capital expenditure over the next 2 to 3 years to around the $7.50 to $7.70 level. The decline in output from Stillwater West over the next 2 years before reaching the 300,000 ounce level again is not really clear in this graph, but is mainly as a result of mining flexibility challenges, which have been exacerbated over the last few months by the operating restrictions following the rail incident. And I'll cover this in a little bit more detail in the next couple of slides.
The main areas I'd like to highlight in this cross section of the mine is the Stillwater Fault, which is that dark line on the right hand side and the depression zone, which is that gray zone on the left hand side of the cross section. Mining flexibility at Stillwater West became challenging as mining fronts approached the slaughter fault and the depression zone, which is a known area of low mineralization and other levels on the mine have successfully traversed both of these features in the past. Following the safety incident in June, however, certain mining blocks were stopped and some of the restricted areas have had further impact on reducing flexibility. This has had a short term impact on development required to traverse these features. And to address the flexibility challenge overall, additional investment into the development will be made at Stillwater West to improve our level of developed state, which will ensure more predictable and sustainable production going into the future.
Current estimates, as I've said, show that it will take us around 2 years to get back to the planned levels of flexibility, which will support optimal production over the long term. Key point on the Stillwater East or Blitz project is that the revised build up plan remains on track. This plan was developed last year following a number of fundamental changes to the original planning, including flooding of the Bembo decline, challenging ground conditions in the project area and then delays to capital projects in 2020 due to COVID-nineteen restrictions. A revised approach to orebody development and developed state was also incorporated. Additional upgrades and enhancements were also included into this revised or the rebased plan, which were not included in the original scope of the project.
As a result, the estimated capital to completion is now $375,000,000 I'm pleased to announce though that the Bembo decline has reached its planned elevation, which allows for the development of critical ventilation infrastructure for the whole of the Stillwater East project. On this slide, the information shown really just highlights the quality of the Stillwater East orebody. As you can see in terms of grade, it clearly surpasses what the Stillwater West orebody has delivered to date. And there are also early indications that there will be a number of mining areas that can be highly mechanized with transverse stoping methods. This forecasted capital expenditure outlook shows what I've already touched on in one of the previous slides where you can clearly see the completion of the capital project expenditure by 2025 as well as a reduction in the non development capital over the next few years as fleet replacement and environmental expenditure is completed.
The investment into the development of the ore body is pretty clear and this will ensure that we can commit to more predictable and sustainable levels of production. I'd then like to hand over to Justin to run into a little bit more detail on costs as well as on the recycling business. Thanks.
Thank you, Wayne, and good morning and good afternoon to everybody and thank you for making the time today. For those of you who don't know me, my name is Justin Frohneman, and I'm the Senior Vice President of and Head of Finance for the U. S. I'd now like to turn our attention to the financial and capital aspects underpinning the U. S.
PGM business with the aim of providing some clarity on our historical cost performance, coupled with an outlook on what the future holds, particularly as Stillwater East ramps up and reaches steady state production levels. Since acquisition, we've seen relative consistency in the working cost profile of our U. S. Business, a noteworthy achievement given the step up in growth activity across our business during this time. Stillwater has historically been very well controlled and managed, and it's pleasing to note that this trend has continued post acquisition.
As a component of total unit all in sustaining costs, working costs have trended at approximately 60%, which I will expand on in further details in the upcoming slides. Given the significant PGM price acquisition since acquisition that was noted earlier in this presentation by Richard, the gearing of the PGM business to royalties and taxes is significant and bears some focus. As is reflected above, royalties and taxes have increased to about 21% of total all in sustaining costs in 1H 'twenty one, up from about 12% in 2017. As such, although this is a very good problem to obviously have given its impact on our revenue, the gearing of our business to high price driven royalties and taxes is certainly notable. Based on elevated rhodium prices, we're using this opportunity to now guide our revisions in our tax and royalty guidance.
And we now estimate that every $100 change in our PGM basket price results in an $8 per ounce increase in our unit all in sustaining costs. Finally, and as I will expand on in subsequent slides, our absolute capital investment made in our business since acquisition is substantial and underpins a drive towards modernization, mining flexibility and sustainability. This was deemed obviously appropriate given the relatively high price environment that we find ourselves in and ultimately supports future production volumes, efficiency, productivity enhancements and fundamentally crystallizes the long life potential that our U. S. Business holds.
Drilling into our underlying operating cost breakdown, it may be of interest to you that our U. S. PGM business has a very similar cost split to that which we've noted at our SA Gold and SA PGM businesses, despite only having about 2,000 employees. On a 12 month time horizon, approximately 66% of our costs are considered fixed, with labor and contractor costs making up about 60% of total operating costs. Utilities, which in this case would include electricity, natural gas and propane, accounts for about 5% of our total operating cost.
From a pure variable cost perspective, consumables in the form of supplies, maintenance parts and other warehouse items accounts for the majority of this flex spend at approximately 30%. Given the somewhat remote location of our operations and the strict operating conditions under which we govern our operations, which is obviously, as Heather will touch on, underpinned by ESG requirements and the Good Neighbors agreement, transport costs are also noteworthy, and these will include the management of employee bussing and material deliveries to and from our site. Looking ahead to where the U. S. PGM segment's unit cost profile is expected to settle, it stands to reason, given our relatively high fixed cost component, that our unit costs are significantly geared to production.
With Stillwater bringing on high quality, more efficient and lower cost ounces, the continued ramp up of Stillwater East and the steady stating of Stillwater West and East Boulder should see the U. S. Businesses unit costs begin to revert from 2022 onwards back to more normalized levels. The tragic events at our Stillwater operations had a material impact on production, as Wayne mentioned earlier, and this now reflects in our 1H21 unit cost performance. As you would have seen in our recent market guidance, we have given a revised outlook for FY 'twenty one due to this.
As I've mentioned earlier, our royalties and taxes forecast to remain at an elevated portion of our unit all in sustaining costs over time, and the profile in front of you assumes a 16.80 dollars per 2 ounce basket price. Any change to this basket will have a direct bearing on our cost profile, with our costs obviously flexing up or down by approximately $8 for every $100 per ounce move in the basket. Current U. S. Corporate tax rates approximate 21% before allowances and deductions.
There have been some utterances about this rate being increased to 26% to 28%, and we continue to monitor these developments closely. Any change in our federal corporate tax rate will have an immediate impact on our deferred tax balances as well as the profiles shown above, and more guidance will be provided should this change occur. For modeling purposes, after allowances and deductions, we estimate that the U. S. Business' cash tax rate at approximately 15% based on current federal and state tax legislation.
And that also assumes, obviously, the allowable deductions that we are allowed to take. Development capital or reserve development spend is expected to approximate $150 an ounce on a forward looking basis, up from about $100 an ounce historically. This is a clear investment, providing better flexibility and quality face availability, thereby supporting the ounce profile shown throughout this presentation. Although material spend, this should see the U. S.
Business' unit cost profile improve over time as we are better able to leverage and support our mining operations. Staying business capital, which would include investments on fleet modernization and optimization, that's obviously given the mechanized nature of our operations, is material over time as is our spend on environmental, which will include tailings and water management. This spend is expected to approximate about $180 per ounce in 2022, reducing to $140 per ounce in 2023 and 2024. Thereafter, this spend is expected to reduce to approximately $30 per ounce, and that really is a reflective of more historical norms. By 2025, it's anticipated that our fleet will be fully optimized and will be underpinned by modern and proactive maintenance practices.
In addition, in accordance with our focus on safety, are also looking at using this opportunity to enhance our operations during this time with the introduction of battery powered equipment and proactive safety initiatives being rolled out. Finally, as Wayne discussed earlier, we do anticipate a reversion on our unit all in sustaining cost and all in cost as Stillwater East continues to ramp up and reach steady state. This should see our business move down the industry cost curve over time and will see us leverage better of our quality ore body and the ore body that we have available to us. Crucially, and this is an important point, we do plan our business on materially lower PGM production prices, and we do not bake in current prices indefinitely. This ultimately drives our cost control levers our capital investment strategy.
Turning our attention now to Recycling. And as you would have seen from our 1H21 results presentation, we've recently segmentalized our U. S. Recycling business, underpinned by a strategic focus on expanding our recycling business across commodity lines and further upstream. Before delving into the specifics of the recycling network, some context is required around our current metallurgical complex footprint in Montana.
This is a world class facility and is arguably one of the lowest emitting PGM processing facilities in the world. The complex houses our smelter, which contains 2 electrical furnaces. And within those furnaces, we commingle our mined concentrate and spent autocatalysts, which are then ultimately smelted. After that smelting process, the resulting mat is processed through our base metal refinery, which is also ultimately responsible for the production of Filterkek, which is processed and out turned by a third party through its precious metal refineries in North America, and it also has a global footprint. The BMR also houses our base metal recovery circuits during which time nickel and copper are produced as valuable byproducts.
If you refer to your appendix, you'll find some more details around these byproducts and the credits associated with these production profiles. The MET complex also houses our assay laboratories and testing facilities, which are responsible for the testing of about 300,000 samples per annum. These samples would include obviously samples for the mine, but it also include the testing of recycling lots for customer catalogs as well as assaying to support hedging, carbon and quality tests on the product that we are being shipped. With regards to the strategic work that we've undertaken in our across our Recycling segment,
it should be noted from
the outset that the recycling value chain is incredibly complicated, fiercely competitive and requires specialist skills and relationships. The North American and European recycling networks are efficient and opaque, being mostly privately held. Upstream network starts with scrap yards. It extends to specialist collectors, processes and decanners and extends to where we currently sit in our smelting and limited refining through the base metal refinery that we spoke about earlier. The refining of Matt and PGMs, as mentioned, is relatively specialized, and there are about 14 participants globally who undertake this activity.
That is the downstream portion of this industry. It is also worthy to note that although we focus on PGM Recycling in this value chain, ancillary products are produced during this process, including batteries, scrap steel, oxygen sensors, alloys and plastics. So there is significant value in the upstream value chain that extends well beyond the PGMs. This area of the value chain is crucial when one considers the need for sufficient scrapping of batteries and fuel cells in the future. We believe we are one of the largest recyclers of PGMs from spent auto catalysts globally, with the business having 20 plus years of history and operating experience behind it.
During this time, our recycling process and procedures have been evolved and adapted to changing market conditions, improving collector requirements and also implementing responsible sourcing, and that extends across the value chain. Given our history in this area, this is not necessarily a new or high risk endeavor for the group and also avoids accusations of greenwashing. Our ability to leverage from an already excellent ESG underpin at our U. S. Business provides further impetus in this area with premium pricing and low yield green options available to us should we need them.
Net net, we believe our involvement in the recycling area is crucial to closing the loop on a closed economy. Overall, our recycling operations are set to deliver more than 700,000 ounces of 3E this year and beyond, and that is utilizing our existing capacity. At a smelter run rate of about 28 tons per day, which is about 12% higher than what we reported in the first half of twenty twenty one, the recycling business accounts for about 17% of the smelter's capacity. We believe we can grow our recycling feed rate by about 25% before capacity considerations need to be undertaken. Given current turnover rates, the recycling segment is forced cost to deliver a U.
S. Dollar return on capital employed of about 11% this year. Given our well established customer relationships, risk controls and hedging strategy, this is a relatively low risk and well managed return. Despite this and despite these positives that I've mentioned, quality improvement efforts, which focus on real margin accretion and increasing our inventory turnover rate, are being investigated and implemented as we speak. Given the active management of customer shipments, particularly around shipment timing, volume delivery and carbon content, our recycling business has managed receipt rates to about 25 tonnes per day year to date.
Feed rates have been very well maintained at the same level, aiding an inventory reduction at 432 tonnes for the half year. One benefit of this strategy has been a reduced exposure to high carbon content material, which is governed by our contract limits and ensures appropriately supply volume and supply support, and those remain key for us because, as mentioned earlier, this is a relationship driven business. As is reflected in the top right hand slide of this chart, our advance rate per 3e PGM basket price remained elevated during the first half of twenty twenty one, and this caused a substantial increase in the quantum of advances made to suppliers, ultimately approximating about $1,000,000,000 at the end of the half year.
This was principally on
the back of high PGM basket prices, which has seen our recycle advance rate per ounce increase from about $2,000 per ounce at the beginning of 2020 to well over $4,000 per ounce at 1H21. This was primarily driven by rhodium's price, of course. Despite this advanced rate and the amount of money that we've been forwarding up, the recycling business is self funded from internally generated cash. The recent dip in PGM prices has seen our net receipts turn positive, and this is aiding a recoupment of working capital. We're currently advancing approximately $10,000,000 per day, while our receipt rate will reflect pricing from 3 months prior, which is about $15,000,000 per day.
It is important to note that our advances are secured by asset inventory, and that's done on-site with predetermined settlement dates for these advances. Consequently, these funds are largely risk free and attract a very favorable interest yield of about 5% per annum. This positive interest carry is absolutely is therefore absolute and it is material. And has seen the recycle business generate an additional $15,000,000 in net interest income during the first half of this year. Overall, the recycling business has generated bottom line earnings of $65,000,000 at the end of the half year, which implies a net income of well over CAD100 1,000,000 for the full year ahead.
Although this represents a margin of approximately 5%, our ability to turn these advances over 4x per year results in an annualized return of greater than 20% and the aforementioned return on capital employed in U. S. Dollars of about 11%. Thank you for your time, and I'll now hand over to Heather to brief you on our ESG performance and outlook.
Thanks so much, Justin. Hello, everyone. My name is Heather McDowell, and I look after the legal, environmental and external affairs functions for our U. S. PGM operations.
I grew up on a cattle ranch near our Montana operations and I'm quite passionate about responsible rural economic development. That's something we're really proud to be doing here in the U. S. The communities near our facilities, as Wayne mentioned before, are rural. The areas around our operations are pristine and they're amazingly beautiful.
We see it as a great privilege to operate where we do. We live and recreate here too and we really take great pride in working with our communities to protect our environment and really our way of life here in Montana. We're uniquely situated in our community engagement here in Montana. Montana's Hard Rock Impact Act creates a sophisticated economic and a social regulatory environment where developers of large scale hard rock mines are actually required to prepare an impact plan that then identifies the local government services and the facilities needed as a result of the mining development. The developer must identify and then commit to paying the resulted increased local government capital and net operating costs.
This structure really creates vibrant communities at the outset of mining operations and that's what we have here. In essence, there's really no need for mining entities to build infrastructure schools, etcetera, that you see in other jurisdictions because here the taxes from the mining operations are already allocated to a sufficient local government tax base. The overall economic impact of this system coupled with highly capitalized work and highly compensated jobs is really profound. In fact, ultimately, the Montana operations contribute over $3,000,000,000 to Montana's economy, and it makes our operations just over 3% of Montana's entire economy. In addition to this regulatory structure and tax allocation, we also have really significant community giving engagement here.
We engage directly with local nonprofits to support as our pillars environmental stewardship, local emergency and health services, educational efforts, especially STEM related ones and other local community activities. We've been really fortunate over the last few years to partner with Wheaton Precious Metals on a number of these projects. In the last year, just citing a few examples, we've helped an adult group home, which is just down the road from us, from our corporate office, build a recreation center. We've sponsored sophisticated emergency training for our local volunteer and ambulance services. We partnered with a high school environmental club to install solar at its school, and we've helped a local college do a river cleanup among many, many other projects.
Here in the U. S, we're really fortunate to have newer facilities and a quite friendly ore body. We're also fortunate to have collaborative relationships such as our Good Neighbor Agreement, which is a binding legal contract with 3 local environmental and community organizations. This Good Neighbor Agreement gives these groups a seat at our mine and our business planning table along with their consultants, which the agreement funds. Through this collaboration, we're able to take our community concerns into account at the very beginning stages of projects, whether the concerns be capital compliance or operations based.
We often change our plans and our course because of this interaction and this feedback, I think a real true collaboration. And in the appendices, there's a lot of additional detail on the Good Neighbor agreement. I encourage you to look there. From a compliance standpoint, we're a water positive environment. Our constituent of greatest environmental concern is nitrates that mix with water encountered underground.
Then when that happens, we use a biologic denitrification process to remove well over 90% of the nitrates and we consistently discharge less than 30% of what we're permitted to discharge from a nitrogen standpoint. We dispose of our treated water, which is actually treated well below drinking water requirements through land application, which consists of irrigation and then cattle grazing, percolation to groundwater and deep well injection. We don't actually discharge directly into our rivers. On the air side, as Justin hit on well, we truly have a world class smelter. It's fully scrubbed.
It emits less than 5% of our permitted limits of SO2. And we think we're probably doing the best in the world there. Our tailings impoundments are fully lined and all of our new waste rock impoundments are lined as well. So moving to tailings, we're very proud of our tailings design, our tailings construction, operation and monitoring and the community engagement that's gone into our tailings facilities over the years. In addition, we believe that our regulatory structure here in Montana is likely the most robust in the world.
In 2015, Montana enacted a law that requires a 3 member independent review panel to approve all of our tailings designs. Our tailings construction is downstream, which was originally for highly seismic and highly precipitate areas. And we just want that downstream construction because it truly is the best form. We operate under a robust tailings operation, maintenance and surveillance manual. This includes strict inspection procedures, monitoring requirements, freeboard in the facilities, there's specific freeboard requirements and a tailings placement strategy.
They are specific daily, weekly, monthly inspections by both the engineer of record and the tailings management team. Right now, we're well positioned to achieve compliance with the GISTM, the Global Industry Standard on Tailings Management. From design and operations standpoints, we're there right now. We've also began a series of community engagements on our emergency preparedness plan, which is required by the GISTM. And these emergency preparedness collaborations allow our local emergency responders, many of whom are actually volunteers, to get experience in emergency preparedness exercises locally.
So we're really proud of doing that as well. We're well situated here to advance on our carbon goals here in the U. S. We've been employing a solar array to power a portion of our Met complex since 2018. We're exploring other renewables, self generation for our portfolio.
As Justin discussed thoroughly, our recycling operations are the future of metals usage. That is how we get where we need to go by having to mine less metals in the future through recycling. In addition to our unique recycling position, we're also uniquely positioned from a power supply standpoint. So as Justin mentioned, our utilities are about 5% of total cost. When you take that and you take our carbon goals into consideration, we're fortunate to have the regulatory scheme we do here in Montana.
So as a product of Montana's attempt to deregulate its power supply in the late 1990s, we are now afforded the opportunity as what is called a choice customer to choose our electricity supplier for both the Met complex and the Stillwater mine. This essentially removes us from utility monopoly risks, at least on the power supply side, and it gives us unique opportunities to package renewables directly with our power supply. Montana, as many of you know, is rich in wind and hydro and solar and battery storage projects are also beginning to emerge. While we still consider the carbon market, we're really especially excited about these direct carbon reduction opportunities. We're also exploring carbon management through forests that surround our mines and are part of a carbon sequestration through mine tailings study.
With these initiatives combined with our community involvement and our engagement philosophy, I think we're positioned really well on the glide path to carbon neutrality. We're thrilled to share our operations with all of you today. We're proud of our journey to embed ESG in our operations and in our communities. And with that, I'll hand it back over to Richard Stewart to conclude.
Okay. Thank you very much, Heather, and once again to Wayne and the rest of the team for the extensive presentations and unpacking of what I mentioned is truly a world class Tier 1 asset that we have in our portfolio. Just moving through very briefly without going through what's been mentioned already. I mean, clearly, as we've said, this is a strategic asset. It's the largest primary palladium producer in the world and that's situated in a great jurisdiction.
So, it's a unique asset in its own right. I think we've outlined the significant payback. We have already largely paid back the asset that we acquired. And as you've heard from today, a very positive outlook. And looking forward, all of that value to be created for our shareholders and for the stakeholders in the environment within which we operate.
I think reflecting on the capital investment, that has been a critical decision that we have made. We have invested in the capital in these operations at a time when prices have been supportive And that has really allowed for this capital investment to be funded from internally generated cash flows. What this capital investment has done has really provided a resilient business towards future price cycles and will facilitate an overall reduction in our operating unit costs in the future. As mentioned, this is a lower cost quartile producer on an all in cost basis looking at the capital we've been investing. It has been sitting in the sort of second to third cost quartile, as Neil mentioned.
But as that capital comes to an end, this is very clearly, particularly with the grade and the quality of this ore body, a first quartile cost producer. The recycling, I think we've touched on the strategic benefit that the recycling brings to us is immeasurable. It differentiates us from our colleagues. It provides us to provide different solutions to our customer base and certainly a base that we would like to grow off going forward and moving into the future. In addition to that, it does deliver some significant bottom line profit to the overall operations.
And finally, I think as we have heard from Heather and the team, stormwater does provide a benchmark operation for ESG practices, not only within our company, not only within the PGM industry, but I dare say within the mining industry globally. So, to try and very briefly sum up and what we have presented today across all of our PGM business is I dare say that over the short 5 years since we've entered the space, we have built a world class PGM business, a leading business that I say competes best, that competes extremely well with the balance of our peers out there. I think what we have managed to show is that we've positioned our business well into the market, into the supply chain to work closely with our customers and really help us understand that market. And it is a market we believe is underpinned by solid fundamentals and still is a long way ahead of it into the future. We have long life assets.
These are assets that have got significant brownfields extensions. And the fact that they are brownfield expansions mean they are low risk, low geological, low technical risk. They can leverage off existing infrastructure, off existing people, which means that the cost of bringing these assets into production is significantly less. We have flexibility with our processing capacity. And these are all positions, I dare say, that makes us very competitive against the growth opportunities of our peers.
We are competitive on the cost curve. Perception of these assets being on the right hand side of the cost curve, I think we have shown through our strategy of integrating contiguous assets, of realizing synergies, of applying new operating models, we have been able to move these operations down the cost curve and are very comfortable to be a second and third cost quartile producer today with further upside on that cost as we continue to realize the synergies that can be brought about through contiguous assets. We have a completely unique geographical diversification. There is no other company that has the spread of assets that we have, certainly in terms of the volume of which it's produced, neither the mix of primary and secondary production. The opportunity to understand the recycling to deliver a more ESG friendly product to complement the primary metals that we produce is unique in the industry.
And finally, and I'd dare say a critical point moving forward strategically when one looks at where the market is going over the next not only 5 10 years, but also over the next 20 years is we have a unique metal mix. And given we have primary palladium producers, given our South African operating base, we have the ability to optimize that metal mix and that prill split for what the world wants at the time when it wants it. This truly is a world class business. And once again, thank you to the teams for sharing their knowledge of the assets with us. And I hope we've left you excited about the future of our business as certainly we are.
And with that, I'd like to hand back to
Neil and the rest of
the team to take us through a conclusion on the balance of the day. Thank you very much.
Thank you very much, Rich. I'm Laurent Charbonnier, Chief Commercial and Development Officer. Neil asked me to present 2 slides on value considerations. For me, I joined the group a year ago after 20 odd years in London in Investment Banking. I was a sector banker and I worked on M and A deals, but also on
quite a
few IPOs and rights issues. So I've had a chance to interact with investors and research analysts. And I would just like here to provide you with some thinking around valuations. Clearly, the market is always right and the market knows best, which is what you learn in London University. But we just want to give you some perspectives around the value considerations.
So if we look at the Investment Banking way of looking at valuation, I just wanted to start with a comparison of CBANNY and Anglo American. And I'll start with a conclusion first, which is that you can summarize this space by saying that today, 1 Anglo American Platinum is worth 2 Sibelius Stillwater. And that's an interesting equation, isn't it? Now I'm not saying that Anglo American Platinum is the best clear for Sylvania Stillwater, because our group is also active in gold. And you have seen this year that we have started to make significant progress with our battery material strategy.
And Anglo American Platinum is a great company. But when we are looking at valuations, we actually look at the competitive landscape. And what strikes me from a value point of view is that if you were to look at who we have become today after the completion of all these acquisitions and the very successful operation and turnaround of all the businesses acquired, the last one, Longme in 2019, I think that this group today is fundamentally different from what it used to be on the back of a successful acquisition campaign. So if you look at Sylvania Stillwater today, the numbers which you've seen and the story you've heard from the PGM team, but also during the last Investor Day on gold and safety, shows you a group who in terms of positioning on the cost curve, in terms of revenues, EBITDA is actually today in terms of size, not that different from Anglo American Platinum. But when you look at this slide, what I find quite interesting is that C'Banier is so much more, because what excites us as a management team is not a picture from the last 12 months.
It's a growth optionality which we have over the next 5 years to actually accelerate our inroad in the battery material space and create a gold and green metal diversified company. So when you think about the discipline and the shareholder returns and the fact that this group is over the last 12 months has committed $1,900,000,000 in dividends and buyback, it's a phenomenal story. But it's more than just a dividend play. It's a company with quite a track record in successful acquisitions and transformation. Hence our question, should 1 hundred American Platinum be worth to SeaDani Stillwater?
And this applies, if you think about it, about other peers within the PGM space or gold. Now if you look at this value equation here, what we would like to do is to help unpack this question by looking at some other parts analysis. And again, having been in the city for 20 years, I've seen many times companies who are not happy with their share price and they can come up with a business plan and the value, a theoretical value of a business plan with a DCF is higher than the share price. And you have a management team who is not happy with its share price. We've seen it many times.
And the market is always right. Here, what we are trying to do is something different on that page. The market is always right. And the last time at the H1 results presentation, when Neil mentioned that there was a valuation opportunity with our business, He also said that there were 4 fingers pointing back at us as a company. And what is important here and that was the point of these 2 very important sessions of Investor Days, it was to ensure that the market has all the necessary information to be able to adequately model our group and come to its own view on valuation.
So when I look at this and for me, the purpose of this page is to really ask some questions around valuation methodologies. What do I see as interesting on this page? I think that first our current market cap is about the size of our SAP PGM business only, which I find interesting. I think that if you look at the PGM business between South Africa, the U. S.
And the interesting growth embedded in the projects we have and we've tried to be conservative here in terms of work. There is already a phenomenal story coming out of the PGM business. I think also that the SA Gold business is an interesting success story by itself. If you remember at the time of a spin off of this group in 2013, it was presented as a business with a very limited future. I find it amazing to look at this business and how it has been transformed so successfully over the years to be able to still have so many years of future ahead of it.
And in particular, when you look at the gold projects NPV, it gives further life to this business. So it's something worth thinking about from some other parts. You can start seeing that now we can add Calibre in terms of NPV. And right now, it's a value that's 27% holding, but we will get more of it. And the building is on track.
But we also need to add the market cap of the RD Gold. And if you think about our assets, our group strategy is certainly to grow the business, but we don't only grow by acquisitions and the partnership with Pioneer announced last week is precisely a fifty-fifty JV. So we will continue to consider smart partnerships. And that's why when you think about our assets, we have $500,000,000 of value right there with our successful investment in DRD Gold, which is easy to monitor. So when you look at our NAV, I think that what we are saying is that it's only half of a story because as you heard today, and that's why we have these dotted boxes, there is a question to the market about what should be the right value for the U.
S. Recycling business. Clearly, this business today is not the size of the Jimmy Corp and American Recycling. But in itself, it cannot be a business that is valued alongside or within the U. S.
PGM business with a straight mining NPV, this is a business model closer to capital goods. We've also explained that within our assets in South Africa, there is a significant value right there associated with uranium. And if you look at the rise of uranium, there is an option value that has was not recognized before in our share price. And we've provided significant information to be able to demonstrate that you have these hidden gems within our portfolio. We're also seeing that if you are looking at AYoneer, and Aioneer has a market cap.
And yesterday, the market cap of Aioneer reflected 100% of the project. Now on, it will also it becomes actually 50% of a joint venture, which has cash in it. So it's no longer a simple project. It's a project that we are confident is going to be built and is being financed. And we are delighted to have partnered with Ionia.
So the point of this slide is to highlight the fact that over the past few years, there has been a material transformation of the business. We are now providing significant information to the market to break the neck of previous stereotypes, which existed around the Group. And if I hope that we have been able to convince you that we do have long life assets, that we do generate cash, that we are financially disciplined, we do pay dividends. There is a lot of hidden optionality, which we are trying to bring in front of the market in terms of disclosure. And that's why we so strongly believe that there is a very attractive investment opportunity at this time with Sea by New Stillwater.
Thank you very much, and I'll hand over to Neil for his conclusion.
Thank you, Laurent. And this is the very last slide of today. So what are the key takeaways? Well, first of all, right from day 1, and I hope you appreciate what you saw today about our people. You've had a good exposure to our management team.
And as I've said, they're important. It's all about our people. And you've seen the depth and the competence of our managers. In the very first session, I do believe we presented a class leading sustainability strategy and it's all about building a climate change resilient business. And that flows through into very clear commitments to ESG.
But it certainly is a higher level of ESG commitment all the way through to sustainability. Today, you should have got a good feeling about the PGM asset base, both here in South Africa and in the U. S. It's high quality. It's long life.
And certainly those assets that may not be in the lower cost quartile will certainly be moving there. We are not moving into the battery metals because we've lost confidence in the PGMs. And you should have come away with a view that we certainly have a robust outlook for PGMs. There is short term volatility. Of course, there is.
We see it. But in the medium to long term, the PGMs have a great and sustainable future. We are committed to our capital allocation framework. It's all about sustainability 1st and foremost, managing our debt, paying dividends, using share buybacks when appropriate. And then if we can create further value for our shareholders or stakeholders, we will certainly do that.
And that's normally in the form of M and A. And if we can't, we will return that in the form of special dividends. We've given you some taste, especially on day 1 of our green metal strategy. I believe personally that is class leading. I believe it's at the front of risk diversification and creating value.
And then last, but certainly not least, you heard from Laurent in and he put it across in a way that was better than I can ever put it across. There's a clear value proposition for investing in our company with very significant upside. So again, as I said on day 1, what makes a good business? Well, first of all, great people. I think you've seen that, A good strategy.
I think we're at the fore end of good strategic thinking. And then of course quality assets and we have all 3. So thank you for your time and attention. I'm now going to hand back to James to manage the Q and A session. Thank you, James.
Please go ahead.
Thanks, Neil, and thanks, everybody, in the U. S. For the presentation. The first question specific to the U. S.
PGM operations is from Arnold van Kran. The question is, was there already a backlog in development at Stillwater West, which was exacerbated by the safety incident? If not, why will it take 2 years to get flexibility back to the required levels? Is there an increased risk of missing production targets at Stillwater due to the lack of flexibility at Stillwater West?
Yes, Arnold, and yes, thanks for that question. I guess, the way I would respond to that is to say to be able to, I guess, more predictably and sustainably manage the production going forward. We want to be at a developed state of around 24 months and we weren't in that position. And as I've said, this was exacerbated by the fact that we had the shut due to the fatal incident, which resulted in a number of blocks of mining being stopped and a number of blocks and development also being constrained in the short to medium term. So this has obviously made matters worse.
The timing on that development is developing through the Storwater fault as well as through that depression zone. As I've said, is going to take us 2 years to establish mining fronts ahead of both of those areas. I think just to respond to your question around the whether it's going to have any impact on our outlook. I think the revised forecast or guidance for the year as well as the numbers that we've shown today, I think take into account what we've already spoken about regarding this level of developed state.
Thanks, Wayne. The next question is from Nkateko Matonze at Investec. Again, for you, Wayne, I think. Blitz project time lines were affected by difficult ground conditions. Should we price in 0 difficult ground conditions when this operation reaches steady state and thus consistent at 850,000 ounces of throughput.
Question is, have we adapted to those ground conditions or do we expect further issues? Yes.
James, I think that was really the purpose of doing that rebase study. So the revised outlook takes those ground conditions into account. And again, it also links to the previous answer regarding the amount of development that we require to do to make sure that that level of production is sustainable, taking those ground conditions into account.
Thanks, Wayne. The next question is from Eckhard Goodacre at BlackRock. Do you expect strong demand for cars to weigh on industry PGM recycling volumes in H2 2021 and next year? I'm not sure Justin or Cleanther would like to respond to that one. Justin?
Thanks.
Richard?
I think from a demand point of view, we're not expecting that to weigh on the recycling of spent auto cats. Obviously, there is pent up demand for vehicles. Think the critical thing for new vehicles. I think the critical thing is that the age of vehicles on the road is actually extending even though we are seeing obviously huge offers and incentives from for new vehicle acquisitions. So people are holding on to their vehicles longer.
I think the critical thing to note, particularly in North America is that the network for recycling is actually fairly constrained. And because it's a cash only cash on delivery business, you are going to find that any collection of water cash will be pushed through the system as quickly as they can be despite what prices or incentives may be doing. So I do think you're going to find that it's going to be pretty steady. We are having to turn down a fairly significant amount of new supply or offers, just purely because we don't necessarily have the capacity for it at this point in time and neither does the industry. So there are natural bottlenecks that I think will result in recycling growing at a fairly steady state as Clanta mentioned in her presentation.
Thank you.
Thanks, Tristan. The next question, I think, for Neil from Emil Lister at Society General. Neil, you mentioned that your target for the asset portfolio was onethree gold, onethree PGMs and onethree battery metals. What is your time horizon to achieve that?
Yes. I would think it's probably a 3 to 5 year time horizon to get there. I think we are being super disciplined in not buying everything that comes across our desk and being quite selective. So it's not something that's going to transition in the next year or 2. But I would say in 3 to 5 years, we should be there both in gold and battery metals.
Thanks, Neil. I'll get to the questions that we weren't able to ask earlier from John Williams at Resco. Can you explain the surge in rhodium recycling in 2020, which wasn't seen in platinum and palladium? Cleanther, maybe you can answer that one.
Sure. So basically, the primary supply reduction in 2020 due to COVID shutdowns and then the Anglo ACP outage actually affected rhodium more than it did palladium and platinum because rhodium has got a longer time line or processing time line. So if you actually look at the percentages, rhodium would have made up around 32% of total sorry, rhodium recycling would have made up about 32% of total supply in 2019 and just moved up a little bit to 35% by 2020. And we expect it to be back down around the 32%, 33% 2021. So really, the impact there is the reduction in the primary mine volumes.
Thanks.
Thanks, Cleontha. I've got another question from Nkateko about our short term response to prevailing metal price volatility. Maybe, Richard, you can handle a general approach to metal price volatility, how we deal with that. And then I can maybe ask Justin to respond on particularly relating to inventory levels and recycling. But there's another question also that came up earlier, Richard, which maybe you can answer at the same time, was relating to the CapEx differential from our guidance and then what we had in the slide, which I think wasn't directly comparable.
So maybe if you can just do that reconciliation for us again.
Perfect. Thanks, James. And hopefully not looking like a deer in the headlights as I was just now. We just jumped on. Sorry for that.
I think in terms of price volatility, look, as mentioned, I think that is something obviously we manage on the marketing side, and it does direct some of our thinking around our spot selling. From an operational perspective, price volatility really doesn't come into our thinking. I think we fundamentally and that's one of the reasons why we have reserve prices where we pitch them, because those are the prices we base our long term thinking on, and those are certainly prices we think are defendable and sustainable through the cycle. And it's on those prices that we base our capital decisions and our operating strategies. And the volatility from an operational perspective is noise, and we really look at the long term.
Clearly, on the marketing side, Clianta will take that into account in a short term sales strategy. I think just in terms of the capital question, and apologies for the confusion there, the capital that was included in the earlier presentation was in fact based on our initial life of mine studies. And for this year, that included 2 things. That included a full catch up of ORD leading over from 2020 during COVID and it also included the K4 project as a full year's worth of project. When we look at what's actually happened over the course of the year and that's what's included in our guidance, firstly, the K4 project only started midway through the year.
It did go through a full board approval. And therefore, for this year, we only forecast about ZAR350 1,000,000 worth of spend on both that and Klippfontein, whereas in the slide that we included here, there was over R1 1,000,000,000 worth of spend. So that entire cycle has just been shifted as the project started later. And then of course with ORD, while there was a catch up required from last year, obviously there also wasn't stoping. So that entire ORD capital profile shifts out.
It is not like there is a sudden build up next year when this is caught up. The entire profile shifts out and that shift was also by about ZAR1.1 billion on the ORD side. So that largely explains the difference between the capital presented and the guidance that we've provided.
Thanks, James.
Thanks, Richard. And just to let you know that we've actually adjusted that slide in the pack. So we've aligned it more with guidance in the current pack on their website. Then just following up on the second part of that question, maybe for Justin, relating to inventory levels in the recycling business. And I'm just trying to interpret this question.
I think it means relating to working capital and the increase in working capital that we've seen with prices increasing over the last little while.
No. Thanks, James. And it's a very good question. I think as we tried to show in the one slide, because we've generally got about 3 month lag between when we are paying for recycled production and when that metal gets returned, what we are finding is that obviously that metal, the advance rate that we're paying to the collector is obviously elevated and that would really reflect prices of 3 months back and we saw a peak of almost $4,500 an ounce 3 months ago on a 3E basis. With the recent decline, obviously, that does mean that we are unwinding that position because we are now advancing at a rate and we are receiving the money back from 3 months prior.
So net net, we are actually gaining. I mean, we are drawing down our working capital at an accelerated rate outside of actually feeding more recycle into our processing facilities. So there's 2 levers, I guess, to us managing our working capital. It's the rate that we pay at, the rate that we receive and then ultimately what we are able to feed at. I think to expand that question a little bit further down the value or up the value chain, I should say, from a collector network point of view, the collectors are all about turning their inventory as fast as what they can.
So as soon as they receive a spent autocatalyst, they basically want to get that inventory out their door. So although they are sensitive to prices, even with the current volatility in the price, they are churning their product out as quickly as they possibly can to companies like ourselves to process. So we haven't really seen any short term change in collective behavior because of the recent price dip that we've experienced across the 3 element PGM basket.
Thanks, Justin. Then I think a question for Neil from Torbel Abicat at Emergence. In your view, where does the required supply growth in green metals, lithium, nickel and cobalt come from? I think we did cover it that we do see shortages going forward. But Neil, maybe you can just give a comment on that side.
Yes. Listen, I could be facetious and say it's going to come from us, but that will create a huge capital overhang. So I won't do that. Clearly, there's a lot of projects around the world. And despite that, there is still going to be a serious shortage of these particular metals.
And hence, why we keep on saying the estimates for battery electric vehicle penetration rates are very much overstated. It's completely unrealistic to assume that so much of these metals will come to the market. There will be shortfalls. I think a lot of the deficits will also start coming from recycling. And our announcement to grow our recycling business is not just for PGMs.
I think everybody needs to understand that we understand the PGM recycling business. A lot of recycling needs to be done on the battery metals as well. We have the skills to do that. If we expand our business, as Justin said, upstream for good reasons, Those are the same collectors that will be collecting the batteries. And then of course, on top of that, being part of the circular economy is exactly right and that's fundamental to our strategy.
So the bottom line is despite many projects, even if they are all developed, there's going to be a shortage of these metals. They're not all going to be developed because some of them don't pass the required grades and hurdle rates. Recycling will be a big contribution. But the bottom line is, there's going to be a serious shortfall in terms of what's required unless you adjust your targets in terms of battery electric vehicle targets and penetration rates? Thank you, James.
Thanks, Neil. And then from Chris Nicholson, and I think I'll ask Richard to answer this one, is could you explain why the new Marikana BEE deal was struck on such favorable terms to the BEE parties? I'm sure they're mostly favorable to BEE parties, but it looks like close to 20% dilution for Sibanye over 2 to 3 years. Richard, I don't know if you can respond to that, please.
Sure. Thanks, James, and thanks, Chris. So I'm not quite sure how to respond to the percentage you've mentioned there. That is certainly not the type of dilution that we see through this. Chris would be happy to try and work through it with you.
Obviously, there are several assumptions that go into that, but perhaps I can just share the principle around this. And listen, that BE transaction, I guess, to many ways really talks to our vision, which is about all stakeholders. And of course, in this instance, we had empowerment partners and we also had shareholders. In setting in completing the Lonmin transaction, we engaged extensively with our empowerment partners. They were good partners to have.
They were very supportive of the business. They had a history in the business, and they were partners we wanted to move forward with. Obviously, it was important to recognize that due to various historical factors and detail that that structure was well underwater. And the reality is there was no real value for the empowerment partners in that looking forward. I think very fair to say that as Sibanye Stillwater is the time completing that transaction, if those empowerment partners had not have stayed in, we would have had to re empower those assets.
And the way we looked at it at the time was to say, if hypothetically we were to re empower it using a similar structure to Rustenburg, what would the ultimate commercial cost of that been to our shareholders? And using that as a base, we structured this transaction with our empowerment partners. So we got the benefit of keeping very supportive and long term partners with us in the company. It wasn't an extra cost to shareholders that they wouldn't have had to incur in any event and the existing Empowerment Partners see value. And obviously that's good for all stakeholders, which is precisely what we target to do.
So Chris would be happy at any time to try and help you. It is a complex transaction. It's a vendor finance transaction and perhaps that's the key to consider. But I'd be happy to sit with you and work through it in detail. But that's the principle of how that transaction came about.
Thanks, James.
Thanks, Richard. And I think on that note, let's wrap it up for the afternoon. I really want to thank everybody who participated this afternoon, all of the presenters who put a lot of time and effort into this and all of you for really sitting through 4 hours of presentations in South Africa just before a long weekend. So really appreciate your interest. And if you've got any further questions or follow-up questions, we are always available to answer them.
Thanks a lot, and be safe.