Sibanye-Stillwater targets $500m in gold streaming deals

SIBANYE-Stillwater aimed to conclude a portion of an estimated $500m to $1bn in potential streaming or metals prepayment deals before it announced its half year results in August, said the group’s CEO Neal Froneman.

“We don’t get any credit for our gold by-product from platinum group metals (PGMs) and it’s a good time to be negotiating because the gold price isn’t done yet,” said Froneman on the sidelines of the PGM Day conference in Johannesburg. “The beauty of selling by-product credits is that it’s not described as debt,” he said.

Gold by-products were estimated by the company to be worth about $500m over the life of mine of the PGM resources in South Africa. At $2,339/oz, the gold price is at record levels and has gained just over 13% in 2024. In rand terms, R1.4m per kilogram, the price received for gold has never been higher.

Sibanye-Stillwater’s balance sheet is under pressure following a heavy decline in PGM and nickel prices last year. It unveiled R6.5bn in cost cutting and on Wednesday raised the prospect of cutting overheads at its head office in South Africa.

While its South African mines were cash positive losses were still being registered at the firm’s US PGM mine Stillwater, although it was now “Ebitda positive”, said Froneman. Analysts say there’s a chance of Sibanye-Stillwater testing lender covenants by the end of the financial year if prices don’t improve.

“We are cash flow positive in South Africa while we have improved the cost base of Stillwater heavily, helped by $200 per ounce improvement in palladium, but also production is more stable and there have been big operational improvements,” he said.

Sibanye-Stillwater ended the 2023 financial year with net debt of R11.9bn excluding debt on its now discontinued Burnstone gold project, equal to a net debt to adjusted Ebitda ratio of 0.58x. The ratio is used by investors to gauge a company’s ability to cover its debt from earnings. The current ratio is below Sibanye-Stillwater’s ‘comfort’ level of 1x and far below the ratio which would break lender covenants of 2x.

Said Froneman in March at the firm’s results presentation: “We are going to raise additional capital. We have been very successfully using streams (selling forward metal production on contract) in the past and prepayments. None of that is debt or dilution to shareholders,” said Froneman.

“There are smart ways of raising capital on assets, especially those that are difficult to find partners for or are difficult to sell. Please don’t think we are not doing anything to further strengthen the balance sheet.”