AN adjustment to the US’s Inflation Reduction Act (IRA) extending incentives to mining would add $240m (R4.2bn) in benefits to Sibanye-Stillwater’s beleaguered US platinum group metal (PGM) operations, the group said on Tuesday.
Commenting in the group’s third quarter results, which showed further margin pressure on its US and South African PGM mines, Neal Froneman, CEO of Sibanye-Stillwater said the IRA underpinned the strategic importance of positioning the company as part of the West’s response to China’s critical minerals dominance.
The IRA, initially passed in August 2022, aims to promote domestic clean energy component production. However, a clause offering a 10% “production credit” for critical minerals extraction (mining) was withdrawn a year later. This meant benefits were only provided to downstream processing such as refining facilities.
But then a subsequent iteration, which is contained in Section 45X (S45X) of the final IRA, has reinstituted the benefit to mining, providing Sibanye-Stillwater a major boost in securing the future profitability of its US PGM mining operations.
“While further engagement with our tax advisors is required to secure certainty with regard to the potential benefits for our US PGM operations from the amended S45X rules, our initial estimates amount to approximately $140m for 2023 and $100m for 2024,” said Froneman who promised further details when available.
Froneman said there were promising signs that Europe would followed the US’s lead in providing economic incentives for the production of minerals for electric vehicles and other carbon reducing applications.
“The European Union and its members have expressed similar intentions to support the development of regional supply chains in Europe,” said Froneman whose company recently approved the construction of the Keliber lithium mine in Finland.
The potential benefits of a redrafted IRA could be a godsend to Stillwater, Sibanye-Stillwater’s US PGM mine which is facing a yet further round of restructuring amid low palladium prices. During its half year results presentation, Sibanye-Stillwater announced a halving in Stillwater’s palladium production next year to about 200,000 oz/year.
Sibanye-Stillwater said in its third quarter production update today that Stillwater suffered a $6m adjusted Ebitda loss despite cutting costs to $1,274/2Eoz.
While the US mines improved their production and cost expectations in the third quarter, the 2E PGM basket price was “well below” all-in sustaining costs, the company said.
The amendments to the IRA may also have an affect on Sibanye-Stillwater’s attitude to Rhyolite Ridge, a lithium/boron prospect in Nevada. US authorities recently approved an environmental permit for the mine which means Sibanye-Stillwater has to decide if it should exercise a $490m option to help build the project with Australian partner, ioneer.
James Wellsted, spokesperson for Sibanye-Stillwater said previously the company aimed to complete a feasibility study into the project after which it would decide whether to take a 50% stake in the project.
One complication emerged last week after environmental and indigenous groups filed a lawsuit challenging the US Interior Department’s approval of the project, said Reuters. In a lawsuit filed in federal court in Las Vegas, groups including the Center for Biological Diversity argued the project posed an existential risk to the rare wildflower Tiehm’s buckwheat and could drive it to extinction, the newswire said.
