Shares in Sibanye-Stillwater shed nearly 10% as firm details litany of threats in third quarter

Molten gold pour.

SHARES in Sibanye-Stillwater reacted sharply to the group’s third quarter production results which detailed a litany of operating, labour and weather-related incidents at its mines in the US and South Africa. Shares in the company were nearly 10% lower in Johannesburg at the time of writing.

Already recovering from a seven week stoppage following one-in-200 year flood event in June, the group’s Stillwater platinum and palladium mine in Montana reported elevated nitrous oxide levels at the East Boulder section that resulted in a 10-day stoppage during September.

Sibanye-Stillwater blamed the event on problems with gas calibration equipment and contaminated fuel. Revised production guidance for Stillwater in 2022 of between 445,000 to 460,000 oz would consequently come in at the lower end, it said today. This metal would be produced at an all-in sustaining cost (AISC) of between $1,380 to $1,425/2Eoz.

The group said in August that the planned increase in production from Stillwater to 700,000 ounces of 2E PGMs is being delayed and will now be reached in 2027.

In South Africa, the company’s platinum group metal (PGM) operations battled with copper cable theft which is on a dramatic rise. “There are armed gangs that get into disused sections of the mines,” said James Wellsted, spokesman for Sibanye-Stillwater. “Crime is definitely on the rise.”

In addition, South Africa’s power utility Eskom embarked on heightened load-shedding (power cuts) during the third quarter. It resulted in a 33,000 oz capital build in PGM concentrate that would most likely be worked through in the current quarter.

Anglo American Platinum and Impala Platinum announced similar capital builds for the third quarter. All in all, some 98,400 oz was stockpiled from South Africa’s three largest PGM producers in the period as a result of Eskom loadshedding (Amplats: 40,400 oz and Implats: 25,000 oz).

Despite the loadshedding and crime headwinds, Sibanye-Stillwater’s production forecast from the South African PGM operations in 2022 is unchanged at a range of between 1,75 to 1,85 million oz, produced at an AISC of between R18,500 to R19,200/4E oz.

Gold production guidance was put at 450,000 to 466,000 oz – well below the 813,00 to 873,000 oz guidance provided in March – as the group’s mines recovered from a three month strike that started in March. Sibanye-Stillwater said production was slowly recovering.

Sibanye-Stillwater said on Tuesday (November 1) that it intended to restructure its Beatrix 4 shaft and the Kloof 1 plant which treats surface resources as they were lossmaking. Nearly 2,000 employees would be affected as well as 465 contractors. The National Union of Mineworkers subsequently labelled the restructuring as “punishment” for the strike.

The outcome of these problems in the third quarter was a 45% year-on-year decline in Ebitda of R8.46bn and a 5% decline quarter-on-quarter. RMB Morgan Stanley said the results would be viewed as “a miss” by the market, especially as they were impacted by the capital build.

“It has been a recovery quarter from severe disruption in the first half of the year” said Wellsted. “The outlook is a lot better. We are back to normal at the gold mines, we have revised US PGM  mines and stockpiles at the South African PGMs which should come through in the fourth quarter.”