Sibanye-Stillwater ekes out pretax profit despite bruising strike-torn Q1

SIBANYE-Stillwater had rand weakness against the dollar and an improvement in the basket of platinum group metal (PGM) prices to thank for helping it survive one of its more disrupted quarters, ended March.

The company emerged from the first quarter of its 2019 financial year with a positive pre-tax profit of R176m excluding revenue from its Rustenburg operations. Including Rustenburg, adjusted EBITDA was R2.5bn. The adjustment is for a change in the way Sibanye-Stillwater accounts for PGM revenue from its Rustenburg shafts.

In terms of the 2016 sale agreement with Anglo American Platinum (Amplats), Sibanye-Stillwater this quarter toll treats concentrate from Rustenburg and then sells the refined metal. Previously, the company sold the concentrate to Amplats. There would be no cash flow impact between the two arrangements; in the case of the Amplats agreement, cash was only paid once the concentrate was refined and sold.

Assuming spot 4E PGM pricing, however, future revenues will outweigh the toll-treating cost, the company said. Sibanye-Stillwater has guided to an increase in all-in sustaining costs (AISC) to between R12,500 to R13,200 per 4E ounce owing to toll-treating.

The performance of the PGM assets also mitigated the adjusted R1.66bn loss suffered by the gold mines during the quarter as a strike that started in November extended into the new financial year. All in all, the industrial action lasted for five months until the union behind the industrial action, the Association of Mineworkers & Construction Union (AMCU), accepted the original offer.

Sibanye-Stillwater was unable to provide gold production guidance for the remainder of the financial year whilst it was getting employees back to work after the strike. The restructuring of the gold mines as announced on February 14 potentially affecting 5,870 employees and 800 contractors also muddied the production outlook for the year.

Full-year PGM production from the US mines is unchanged at between 645,000 to 675,000 oz at an AISC of $690 to $730 per 2E oz. PGM (4E) production from the South African operations is expected to be between one million oz and 1.1 million oz, also unchanged.

“While guidance across the PGM ops (US/SA) was reiterated, an unknown is the fact that there has been no guidance on gold operations which is likely to be a source of uncertainty for the market,” said Goldman Sachs. It also noted the negative cost trend. “While this was not entirely unexpected, the balance sheet remains a key focus for investors, and we believe that this, coupled with the fact that gold guidance remains unknown, is likely to be taken negatively by the market,” said the bank.

Concerns about the balance sheet will almost certainly influence whether Sibanye-Stillwater adds its name to bidders for AngloGold Ashanti’s Mponeng which was today marked for sale. James Wellsted, head of investor relations for Sibanye-Stillwater, said the company had its hands full with the integration of Lonmin.

Said Sibanye-Stillwater: “Precious metals prices remain significantly elevated and at current spot prices further deleveraging towards an anticipated target of 1.8x net debt to adjusted EBITDA is expected by year-end”.

On April 11, Sibanye-Stillwater raised $125m (R1.75bn) which it used to pay down debt after agreeing with Citibank to sell forward 105,906 ounces of gold in the fourth quarter of its 2019 financial year. It took total de-leveraging in that week to R3.45bn following the placing of worth R1.7bn. In 2018, it raised $500m by selling metals in a streaming transaction of which $400m was used to lower debt.

Shares in the company edged down 1.8% by midday on the Johannesburg Stock Exchange. on a year-to-date basis, the stock is roughly a fifth higher.

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