Froneman tags 2020 for possible Sibanye-Stillwater dividend provided tail-winds sustained

SIBANYE-Stillwater raised the prospect of resuming dividend payments during its 2020 financial year, but the intention turns on a complex of events going its way, such as the absence of operational mishap and continued high prices for both platinum group metals (PGMs) and gold.

The company also flagged a lower-than-forecast ramp-up of its Blitz PGM project at Stillwater in the US, and said that about 10% of its South African gold production would be out of the money until after the third quarter whilst it worked through a 2017 hedging programme.

Commenting in notes to the firm’s interim results ended June, group CEO Neal Froneman said Sibanye-Stillwater’s performance had been “solid” considering it endured a five month strike at the South African gold mines.

The outcome for the group was a $89m headline earnings loss for the period which compares to a $8.2m profit in the six months of the previous financial year. The impact on Sibanye-Stillwater’s balance sheet was to take net debt to 2.5x earnings before interest, tax, depreciation and amortisation (EBITDA). It had been targeting 2x by year-end.

Froneman said debt on the balance sheet remained “elevated”, a concession the company also made at its year-end results presentation. Reducing net debt on the balance sheet was on the cards, but provided the sticks fell the company’s way, he said.

“Under the current supportive precious metals price environment and with a more positive operational outlook, driven by the return to profitability of the South African gold operations, continued production growth at the US PGM [platinum group metal] operations, no major operational disruptions, and the realisation of synergies from the Marikana operations will contribute positively to earnings and and cash flow,” he said.

This would “… facilitate rapid deleveraging, supporting the possible resumption of cash dividends during 2020,” said Froneman.

Charl Keyter, CFO of Sibanye-Stillwater indicated in a conference call following the announcement of the group’s interim results that a gross debt of R15bn had been targeted – a figure arrived at as EBITDA could descend to R6bn but allow the company to stay within its debt covenants.

“If we get to a net debt to EBITDA of 1.5x then we would open the discussion with the board on cash dividends,” he said.


Sibanye-Stillwater’s Blitz project at the US PGM operation would produce below guidance for the year at some 625,000 to 640,000 ounces after the company ran into “challenging ground conditions” which have required remedial work, it said.

All-in sustaining costs (AISC) would also be higher at between $740 to $755 per 2Eoz [palladium and platinum] as a result of higher taxes and royalties – a function of the lift in PGM pricing in general. For every $100 per oz increase in the PGM basket, there is a $7/oz increase in royalties and mine-related taxes, the company said.

“These operational challenges are expected to be temporary and are not expected to impact on the production build up at Blitz to approximately 300,000 2Eoz by 2022,” it said.


Froneman described the last 18 months as “unprecedented” in which the viability of the company was called into question. This referenced a spare of underground fatalities at the South African gold mines which cost 21 lives, and a five-month strike by the Association of Mineworkers & Construction Union (AMCU), about which Froneman was withering.

As he has done before, Froneman accused AMCU of failing to work in the interests of its members and said the public voting system by which strike mandates were provided led to abuse. Amended legislation in South Africa allowing for secret balloting was welcomed.

For all the soul-searching of the past two financial years, the South African gold operations were building into a fresh proposition for Sibanye-Stillwater, however.

Production was expected to be between 771,617 oz to 803,768 oz after registering output of 262,928 oz in the first half – about 56% down on the first half output of the 2018 financial year. The mines had also put in stronger safety performance: there were no fatalities this year.

Sibanye-Stillwater is, however, counting the cost of a hedging programme from 2017 which it suspended in June.

About 250,545 oz in gold – about 23% of normalised production over a 12-month period – was hedged through zero cost collars with a floor price of R610,400/oz and a cap price of R668,300/kg. Approximately 40% of the hedged production is due for delivery during the third quarter with the remaining 60% due over the following three quarters, the firm said.

This provided “… approximately 90% exposure to the spot rand gold price” from the third quarter, said Sibanye-Stillwater. The rand gold price is currently at about R760,251/kg.