SIBANYE-Stillwater is to cut production at its US Stillwater palladium/platinum mine 200,000 ounces/year and is nearing additional prepayment deals on gold as well as chrome and platinum production that will bag it between $600m to $700m.
These steps are intended to further shore up the miner’s balance sheet following another chastening operating period in which it reported negative free cash flow of R7bn for the six months ended June. The group passed the interim dividend.
The root cause was sustained low prices for platinum group metals (PGMs) in particular which resulted in non-cash impairments of R7.5bn. As guided in a trading statement last week, Sibanye-Stillwater’s basic earnings for the six months fell just over 100% to R7.47bn. A taxed loss of R7.1bn was suffered (2023 H1: +R7.8bn).
Net debt consequently increased R6.8bn to R18.7bn. As of June 30, Sibanye-Stillwater reported a 1.43x net debt to adjusted Ebitda ratio. This is, however, well below the recently renegotiated covenant with lenders of up to 3.5x adjusted Ebitda (from 2.5x previously) from June 2024 to June 2025 and 3x from July 2025 to December 31, 2025.
Sibanye-Stillwater calculated that these agreements represented an additional net debt headroom of R13bn (to July 2025) and R6.5bn (to end-2025) assuming the R13bn in annualised Ebitda reported today for the first half of the financial year. Total liquidity had been increased by R25bn ($1.4m).
More deleveraging of the balance sheet is to come in the current six months because Sibanye-Stillwater is in “advanced stages of securing” additional metal sales agreements following its R1.8bn gold prepayment deal in August. The prepayments will be in chrome, gold, and PGM production from Sibanye-Stillwater’s South African assets.
The already announced gold prepayment is for delivery of 48,129 oz of gold (1,497kg) in equal monthly tranches from October 2024 to November 2026 at a rand price of between R1.35m and R1.74m per kilogram.
Stillwater job cuts
But as largely expected, recent improvements in all-in sustaining costs at Stillwater mine in the US were to limited avail.
Consequently, Sibanye-Stillwater announced further 800 in employee and contractor job losses at the mine as it takes forecast annual production down to about 200,000 oz in 2025. Stillwater West mine will be put on care and maintenance while high grade output at Stillwater East section would be targeted.
With about three-and-a-half months of the financial year remaining, Stillwater has been guided to production of between 440,000 and 460,000 2E oz. “We looked at placing the whole of Stillwater on care and maintenance but that would be higher cost,” said Neal Froneman, CEO of Sibanye-Stillwater in a presentation on Thursday.
2E production at Stillwater in the six months was 238,139 oz (2023 H1: 205,513 oz) at an AISC of $1,343/oz ($1,737/oz). However, the AISC was still $300 to $400/oz above average group AISC.
“Reducing unit cost to achieve profitability at current prices is not possible without increased capital investment in production growth,” said Sibanye-Stillwater. A fundamental review of the mine operations to reduce AISC to about $1,000/2Eoz will follow that restructuring, the group said.
Sandouville terminates supply
The axe has fallen at the Sandouville refinery in France. Sibanye-Stillwater said the firm had pared losses to $15m, 57% less year-on-year but its supply contract had been terminated early at a cost of $37m. Ramp down of production was expected in the first quarter, said Mika Seitovirta, chief regional officer of Sibanye-Stillwater’s Europe assets.
Nickel production from the refinery increased 22% to 4,270 tons while sustaining costs fell 37% to $23,684/t.
As announced in August, Sibanye-Stillwater is studying the viability of producing pCAM – dubbed the GalliCam Project – a pre-cursor cathode active material to nickel sulphate. A definitive feasibility study would be completed with a pilot plant thereafter. pCAM had been produced in Sibanye-Stillwater laboratories.
Sibanye-Stillwater completed the heavy lifting of restructuring at its South African PGM and gold during the six months ended December (of R6.6bn). But it said today that the restructuring of the Kloof 2 Plant as well as mine services in South Africa would yield R461m in additional savings.
Sibanye-Stillwater subsequently downgraded gold production guidance to between 530,000 and 563,000 oz compared to last year’s gold production of 646,680 oz.
During the six months, Sibanye-Stillwater also increased its revolving credit facility to R6bn and secured a €500m (R10bn) “green” financing package to pay for its proposed Keliber lithium mine project in Finland. Froneman said that despite the current oversupply of the mineral “demand for lithium will continue to rise significantly”.
Shares in Sibanye-Stillwater were trading 10% higher in Johannesburg as of 1.30pm (South African time) partly on the back of a 1.48% improvement in the palladium price. Prices for platinum and gold were also higher.
