Sibanye-Stillwater promises “future windfalls” as PGM earnings eclipse acquisition costs

Sibanye-Stillwater promises “future windfalls” as PGM earnings eclipse acquisition costs

SIBANYE-Stillwater promised stakeholders “future windfalls” as a result of record platinum group metal (PGM) prices after its PGM mines generated R15.3bn in first quarter earnings before interest, tax, depreciation and amortisation (EBITDA).

This was more than the cost of buying them. Before Sibanye-Stillwater embarked on a PGM acquisition spree in 2016, it primarily mined gold.

Commenting in its first quarter production report, Sibanye-Stillwater also said that it continued to seek mineral diversification by investing in battery metals and seeking gold industry merger and acquisition activity in order to “… rebalance its portfolio” and grow internationally.

The group was linked with merger bids for Gold Fields and AngloGold Ashanti. Whilst Sibanye-Stillwater CEO, Neal Froneman, didn’t identify specific deals, he said the consolidation of the two companies with his would create a ‘South African champion’ that could compete on an international stage.

“Re-balancing our investment portfolio should ensure greater earnings consistency through the cycle and create a larger, more stable investment proposition, which will be relevant to a broader and deeper pool of investors,” it said.

The company reported record quarterly earnings of some R19bn in adjusted EBITDA, a year-on-year increase of 78%. Production from its US and South African PGM mines and its South African gold mines was higher, returning to pre-Covid-19 levels.

Gold output was 249,392 oz, a 5% increase whilst 9% and 6% year-on-year production increases were registered at the US and South African PGM asset of 154,350 2E oz and 444,609 4E oz respectively.

Froneman said that the company had offered its assistance and infrastructure in the proposed roll-out of Covid-19 vaccines – due to kick off in South Africa on May 17 – but that it had “not yet received approval to do so”.

The rand gold price was 8% higher year-on-year, but the driving force behind the numbers was the PGMs. Largely owing to record rhodium and palladium prices, the 4E PGM basket price realised by South African PGN production in the quarter was R52,722/oz – an increase year-on-year of 59%.

“With the 4E PGM basket having increased further during Q2 2021, the outlook for the year is very promising,” said Sibanye-Stillwater.

Sibanye-Stillwater declared a final dividend of R9.4bn, equal to 321 South African cents a share, for its 2020 financial year in which it posted a record full-year attributable profit of R29.3bn. As of December 31, the company was R3.21bn net cash.

Production guidance for the 2021 financial year remained unchanged, the company said. Sibanye-Stillwater said gold output would be between 884,000 ounces and 948,000 oz and 1,75 million and 1,85 million oz 4E from the South African PGM mines. The firm’s Stillwater asset in the US would produce 660,000 and 680,000 oz 2E.