Sibanye-Stillwater to lose billions of rands in prolonged gold strike – but hit to employees is worse

Miners at Beatrix gold mine Source: Sibanye-Stillwater

SIBANYE-Stillwater lost about R4bn in EBITDA when it last had a strike at its gold operations in 2018/19, which amounts to around R800m on average per month over the five-month extent of the strike.

These losses were meaningful at the time, with the company carrying relatively high levels of debt and still integrating newly acquired platinum group metal (PGM) assets. The impact of this year’s gold strike – even if it is prolonged – will be ameliorated by significantly higher PGM prices.

The average rand basket price for PGMs so far this year is R42,500 per ounce, slightly better than the R40,517/oz average in the second half of Sibanye-Stillwater’s 2021 financial year when PGM prices moderated. The average PGM basket price for the 2018 financial year in contrast, was R13,838/oz for the South African operations and R13,337/oz for the US operations.

The impact on striking employees at the gold operations however, will be just as profound as three years ago – if not worse, given headline inflation as per StatsSA data is higher at around 5.7% in January compared to inflation of 4.5% in 2018, and 4.12% in 2019

The strike at Sibanye-Stillwater’s 1 million oz per year gold operations began on March 9 and was led by the National Union of Mineworkers (NUM) and the Association of Mineworkers & Construction Union (AMCU). After unions embarked on the strike, Sibanye-Stillwater adopted a no work, no pay policy as it is permitted to do in South African labour law.

According to data provided by Sibanye-Stillwater, entry-level employees have already lost the economic benefit they would have received this month had Sibanye-Stillwater agreed to unions’ R1,000 per month wage increase. (Sibanye-Stillwater offered a R700 per month wage lift for entry level miners). The strike is just over a week old.

If the strike extends for another two weeks, employees will lose the benefit for a year of Sibanye-Stillwater’s revised pay offer. If the strike goes on for 24 days, employees will have lost the benefit for a year had Sibanye-Stillwater agreed to union demands.

In addition to improved PGM prices, Sibanye-Stillwater is in better financial shape than in 2018/19. At that time it was carrying over $2bn in net debt from its acquisition of Stillwater Mining and prior to the onset of the strike in November 2018, it was recovering from a string of fatal accidents on its gold mines.

This time around, gold represented only 6% of EBITDA given the ascendancy of PGM prices. The gold assets comprised 19% of EBITDA in the firm’s 2018 financial year. The current environment is supportive of sustained PGM pricing, according to most market commentators.

Another fact germane to the interests of employees is that the mines are now three years old which is especially relevant for Beatrix which only has about four years of mining left. An extended strike could further shorten the mine’s life.

The NUM branch at Beatrix voted against the strike.