Weaker PGM basket takes Sibanye-Stillwater lower for first quarter blighted by strike

Sibanye-Stillwater CEO, Neal Froneman. Pic: Martin Rhodes

A DECLINE in the average platinum group metal (PGM) basket price resulted in lower adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the first quarter of Sibanye-Stillwater’s 2022 financial year.

The group, currently in a dispute with labour unions at its gold mines, said EBITDA totalled R13.7bn compared to R19.8bn for the corresponding period in the previous financial year. The average PGM price came in at R45,061 per 4E ounce compared to R52,722/4E oz previously.

Last year’s EBITDA was an all-time record.

Production of PGMs were also lower in the quarter compared to last year, especially at the US-based Stillwater mine where 2E production totalled 122,389 oz compared to 154,350 oz in the prior year.

But the largest production variance was at Sibanye-Stillwater’s gold operations where a strike involving the Association of Mineworkers & Construction Union (AMCU) and the National Union of Mineworkers (NUM) is entering its third month. Gold production totalled 137,091 oz for the quarter (2021: 249,392 oz).

Gold production was also affected by the suspension of the tailing storage facility at Beatrix mine in the Free State province in order to conduct “precautionary reinforcement and buttressing work”.

Commenting on the strike, Sibanye-Stillwater CEO Neal Froneman repeated similar messages throughout this dispute which was to say the company would not be “coerced” into awarding above inflation wage increases it couldn’t afford.

The gold operations contributed about 7% of EBITDA last year.

Sibanye-Stillwater has lifted its wage offer to an increase of R850 per month for category 4 entry-level miners. This is slightly below the R1,000/month increase demanded of AMCU and NUM but ceding that small amount might create a precedent ahead of PGM wage negotiations which are imminent.

According to the Daily Maverick, an online publication, AMCU will demand as much as a 40% increase in wages because PGM prices have been on a major bull run over the past two to three years.

Froneman said the PGM market was in good health but volatile, partly owing to the war in Ukraine and renewed Covid-19 lockdown containment measures in China. But the pressures related to a shortage of semi-conductors – which slowed automotive manfacturing which Sibanye-Stillwater’s PGMs supply – and interruptions from Covid-19 had receded in the quarter.

“The operating environment during 2022 has been characterised by socio-political and economic uncertainty, however the group remains well positioned to navigate through these challenges, both in the internal and the external environment,” he said.

Inflation, a feature creeping into mining company accounts even before recent events in Ukraine, was a factor for Sibanye-Stillwater’s first quarter. All in sustaining costs were 10% higher at some R712,418/kg (US$1,456/oz).

This was due to a 25% increase in the rand per ton milled cost as a result of lower throughput and higher consumption of cyanide (the latter due to lower densities in slurry due to excessive rain), as well as a 3% increase in sustaining capital, the group said.

Post the close of the first quarter, credit rating agency Moody’s Investors Service upgraded Sibanye-Stillwater’s credit rating to Ba2 with a positive outlook from Ba3 previously

1 COMMENT

  1. Hopefully Unions can see how quickly fortunes can change for mining companies. Don’t link your remuneration to their performance, link it to inflation, that’s all you are fighting.

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