SIBANYE-Stillwater said the risk of significant Covid-19 related operational interruptions, especially at its platinum group metal (PGM) operations, had declined and that the outlook for the remainder of its financial year was positive.
This bodes well for the reinstatement of the firm’s dividend policy, especially as the company benefits from higher run-rates from its PGM and gold mines amid potentially structurally higher dollar gold prices and rand weakness.
Commenting in a trading statement today, Sibanye-Stillwater said interim share earnings would come in at 350 South African cents (21 US cents/share) representing a 404 cents/share improvement (25 US cents/share) over the 54c/share interim loss in 2019 – a period influenced by a four-month strike at the firm’s gold operations.
Sibanye-Stillwater said that post-period infection rates of Covid-19 disease were on the decline. “The likelihood of more stringent measures being re-imposed appears remote at present,” the group said of lockdown measures intended to combat the disease.
It added that the risk-free framework agreement adopted by the industry with unions following a court initiated by the Association of Mineworkers & Construction Union (AMCU), had been abandoned in favour of an ad hoc “more adaptive approach”.
Whilst the change in approach had made management of the firm’s PGM and gold mines challenging during the six months, Sibanye-Stillwater’s mines were operating at at a 70% to 80% run-rate by the end of the interim period.
Gold production in the six months increased 17% to 403,621 ounces, sales of which were boosted with stockpiled material. As for PGMs, 4E production was 5% higher at some 657,828 oz following the inclusion of the Marikana assets.
Prices for gold and PGMs was buoyant whilst the rand slipped against the dollar. Consequently, the average 4E PGM basket price was 92% higher year-on-year at R33.375 per 4E oz whilst the gold price at R864,679 per kilogram was 45% higher.
The impact on adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was a significant 718% year-on-year increase to R16.5bn.
Given the strong outlook for pricing, the group is likely to make significant in-roads into its net debt position. As of June 30, Sibanye-Stillwater had net debt to adjusted EBITDA of 0.55x compared to 1.25x as of December 31 and 0.75x at the close of this year’s first quarter.
“The group is well below our internal targets, illustrating the group’s robust financial position, Sibanye”-Stillwater said in its trading statement notes. It said it was “well positioned for continued strategic delivery and the ongoing return of significant value to shareholders in the form of meaningful total returns.”
Commenting in June, Neal Froneman, CEO of Sibanye-Stillwater, told Miningmx that the reinstatement of the dividend at the interim was not a slam-dunk event. “What we clearly have to think about is whether the board will declare an interim dividend,” he said.
“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.