SIBANYE-Stillwater may keep shareholders waiting until after its interim results announcement in August before reinstating the dividend owing to the disruption posed by the COVID-19 pandemic, said CEO Neal Froneman.
“What we clearly have to think about is whether the board will declare an interim dividend,” said Froneman in an interview with Miningmx. “It’s going to depend on the economics at that point in time,” he said of the August board meeting when the resumption of the dividend will be discussed.
Sibanye-Stillwater stopped paying dividends about three years ago after spending $2.2bn buying Stillwater Mining, a company that mines palladium and platinum in Montana, US. The deal was criticised at the time as a reckless over-reach.
However, the palladium price has more than doubled in value since the transaction and shares in Sibanye-Stillwater have re-rated. “I’m still hopeful that we will still in 2020 reinstate our dividend. It might just not be at mid-year; we’ll have to wait and see.”
Froneman said in February that the company was on track in its aim of reducing net debt as set against earnings before interest, tax, depreciation and amortisation (EBITDA). At the end of the firm’s first quarter, net debt as a ratio of EBITDA was 0.75x.
But the onset of the COVID-19 pandemic had resulted in an initial stoppage of mining activity and then gradual resumption, as the South African government joined its counterparts globally in various lockdown regimes aimed at keeping people at home and limiting social interaction.
“The lockdown and the ramp up would certainly have a negative effect on earnings in the second quarter and it could have a small knock on effect into the third quarter as well,” said Froneman.
“But what’s actually happening is that when you look at net debt to adjusted EBITDA, it is unlikely to increase and should stay relatively stable, as EBITDA is a trailing 12-month factor and some of the bad quarters that were impacted by the strike in 2019 are falling out. Mathematically, we are continuing to deleverage,” he said.
Froneman said Sibanye-Stillwater was as “well positioned” as it was in February despite “minor international speed bumps”.
“They’re not speed bumps that are company specific; every company is going to feel the bumps that we’re talking about. But we have a decent gold business and we have a really nice palladium and rhodium exposure,” he said.
“You can’t look ahead now and make that call (regarding dividends). In August, when we have the board meeting and we have all the numbers and we see where the economies of the world are, where the rand is, where the commodity prices are, we’ll make the call.”