Sibanye-Stillwater to make investment decision over R3.9bn PGM project in coming weeks

Macro image of a one ounce Palladium bar

SIBANYE-Stillwater will decide this quarter whether to press ahead with the development of the K4 platinum group metals (PGM) project which, if approved, would produce 250,000 ounces of PGMs incurring a capital cost of R3.9bn.

The project, previously considered uneconomic and excluded from the group’s reserves and resources statements, which were today updated, is part of the Marikana assets acquired by Sibanye-Stillwater with the all-share purchase of Lonmin last year.

An investment decision over another project, the Klipfontein open-cast development, was also to be assessed in the quarter. Klipfontein is smaller in scope, expected to yield 100,000 oz of 4E PGMs. K4, described as a brownfields project, is scoped to potentially produce a total of 12.8 million oz. Detailed feasibility studies were recently completed on both projects.

All in all, Sibanye-Stillwater said its South African PGM mineral reserves had increased 40% to 39.5 million oz year-on-year. Gold mineral reserves were stable year-on-year at 11.3 million oz with depletion of a million oz offset by a 0.8 million oz increase in attributable mineral reserves from DRDGOLD after Sibanye-Stillwater exercised an option to take its stake in the company to 50.1% from 38.05% previously.

The market for PGMs is highly encouraging of new production. Sibanye-Stillwater said in its mineral reserves and resources statement today that average basket prices at both its South African and US PGM operations represented margins in excess of 100% of its assumed reserve prices.

Spot rhodium and palladium prices have exceeded $20,000 and $2,400/oz respectively this year resulting in a basket price in excess of R45,000/4E oz at the South African operations and over $2,000/2E oz at the US assets.

The counter-balancing consideration for Sibanye-Stillwater approving K4 and Klipfontein, however, was the investment environment in South Africa.

Neal Froneman, CEO of Sibanye-Stillwater, was heavily critical of the South African government’s failure to improve the regulatory climate in the country’s mining sector. “We’ve got to have commercial views of the country and [the government has] done nothing, nothing to actually stimulate investment interest,” he told BusinessLive in an interview.

“I don’t think [it knows] how investors think, to be blunt,” Froneman said.

Set against its gold reserve price of R720,000 per kilogram, the current spot price of about R900,000/kg represented a 25% margin, said Sibanye-Stillwater. The gold price was about R1m per kilogram for about seven months during mid-2020, it added.

Sibanye-Stillwater is due to report its full-year operating and financial results on February 18. It said earlier this month that it would report a record-breaking full-year attributable profit of up to R30bn for the 2020 financial year compared to R62m in 2019.