Sibanye-Stillwater, DRDGold raise red flag on lower full year profits as market cools

Neal Froneman, CEO, Sibanye-Stillwater

Precious metals group Sibanye Stillwater and its dump retreatment subsidiary DRDGold have posted trading statements indicating sharp drops in profits for their financial periods to end-June.

The share prices of both groups have declined markedly this year because of the lacklustre performance of the gold price as well as major problems at Sibanye-Stillwater including the closure of its Stillwater Palladium mine in the United States for seven weeks because of flooding.

The Sibanye share price has fallen 43% from around R74 in early March to around R42 currently while the DRDGold share price is down 34% over the same period from around R16 to current levels around R10.5.

The Sibanye trading statement indicates earnings per share for the six months to end June are expected to drop to between 402c and 447c a share (previous comparable period – 843c) which will be a drop of between 47% and 52%,

Sibanye attributes the drop to lower gold production from its South African mines which were affected by a strike that ran from March 9 through to June 3.  In addition no ore was processed or sold from the Beatrix mine in the first quarter of 2022 because processing was suspended to allow for the re-inforcement of the Beatrix tailings storage facility.

Production from the South African gold mines (excluding DRDGold) dropped 77% in the first half of 2022 to 100,568oz.

It added production from the US platinum group metals (pgm) operations was “significantly impacted by the severe regional flooding in Montana on 12 and 13 June.”

DRDGold will meet its guidance on production and costs for the year to end-June but still expects earnings to between 32% and 12% lower at between 114.4c and 148.0c per share compared with 168.4c for the year to end-June 2021.

The company’s trading update says DRDGold produced 183,902 oz of gold at a cash operating cost of R600,875/kg and capital investment of R584.1m which compares with the initial guidance of production of between 160,000oz and 180,000oz at a cash operating cost of R600,000/kg and capital investment of R600m.

At June 30, DRDGold held R2.5bn in cash compared with R2.12bn a year previously and had no bank debt.