SIBANYE-Stillwater showed signs of staunching losses at its US mine Stillwater but the distress caused by weak platinum group metal (PGM) prices continued to wrack the group: first quarter adjusted Ebitda fell 72% to R2.1bn ($113m).
Commenting in a first quarter update on Friday, the group’s CEO Neal Froneman called for patience while company-wide restructuring took effect, adding he was “cognisant” ongoing cash losses impacted “negatively on our covenant ratios” with banks.
He said Sibanye-Stillwater was “… proactively engaging our lenders on temporarily raising our lending convenants”. This raises the risk the group could exceed net debt to Ebitda covenants with lenders set at 2.5x despite the restructuring. Net debt to Ebitda was 0.58x as of December 31.
“The longer PGM prices stay at these levels, the more the chance increases of us increasing debt and risk breaching the covenants,” said James Wellsted, head of corporate affairs for Sibanye-Stillwater.
“We do think there are good signs of an improvement in the PGM price, which may help us avoid this scenario, but we are looking at various alternative financing options as well as engaging with lenders … for any eventuality,” he added.
Sibanye-Stillwater was progressing selling metals upfront or streaming production with a royalties company in an effort to generate new cash flow. Froneman previously said up to $500m could be generated in this way.
Shares in the company gained 3.5% in early Johannesburg trade.
All of Sibanye-Stillwater’s businesses reported a decline in first quarter adjusted Ebitda year-on-year except Stillwater mine which benefited from an insurance claim, and nickel refiner Sandouville – but which still made a loss in the period.
But the major culprit were the South African PGM operations. First quarter ebitda fell $314m year-on-year to $77m. In addition to lower PGM average prices in the quarter, an accident at Siphumelele and residual effect of restructuring costs weighed on the division. In February, Sibanye-Stillwater said it would retrench 852 full time employees and contractors at its South African PGM mines.
Shareholders were warned there were no quick fixes this year, however – especially as PGM prices, which have stabilised, remain at lower levels. The impact of PGM mine restructuring in South Africa was “expected to manifest in a phased manner over an extended period”, Sibanye-Stillwater said.
There was little succour from the group’s gold division despite record rand prices for the metal, and near record dollar prices. Adjusted Ebitda fell $9m to $35m owing to an 18% decline in output following the 2023 restructuring of Kloof, the cost of which was felt during the quarter.
On April 11, it announced further restructuring of its gold operations, potentially affecting 3,107 employees and 915 contractors. As previously reported by the group, a restructuring notice has also been issued to employees at Burnstone, the gold project Sibanye-Stillwater is shelving as it believes gold price optionality remains strong over time.
Elsewhere in the group the performance was mixed. Recent operational improvements at Sibanye-Stillwater’s base metals reprocessing business New Century Resources were negatively affected by “severe regional weather” in Australia. Gold Fields also reported major first quarter disruption at its Australian mines.
