Sibanye-Stillwater, Navigating Challenges in Mopani Copper Bid Amid PGM Market Pressures
Sibanye-Stillwater has affirmed its ongoing negotiations with the Zambian government for the acquisition of Mopani Copper, despite competition from Abu Dhabi’s International Holding Company (IHC), as reported by the Financial Times. IHC, the largest listed company in the United Arab Emirates, has entered the bidding for Mopani and is pledging to preserve jobs, in contrast to Sibanye-Stillwater’s proposal, which includes job cuts.
Earlier this month, Sibanye-Stillwater stated that it would not engage in a bidding war for new assets. Shareholders are unlikely to support additional costs for the company, especially after the announcement of job cuts at its South African platinum group metal (PGM) mines.
BMO Capital Markets highlighted the pressure on Sibanye-Stillwater due to the current basket price for PGMs. The all-in sustaining costs (AISC) at its South African PGM mines were $1,083 per ounce in the first half of the financial year, while the basket price was $1,867/oz. However, the basket price has since fallen to $1,400/oz, significantly impacting profitability. The South African PGM operations contributed 84% to Sibanye-Stillwater’s EBITDA in the six months ending June. CEO Neal Froneman stated in October that the company would not be able to pay dividends at the current spot metal prices.
Sibanye-Stillwater plans to restructure four shafts, with two of them having reached the end of their economic lives. The Rowland (Marikana section) and Siphumelele (Rustenburg) shafts need to reduce costs to remain viable. RMB Morgan Stanley suggested that unit costs should be reduced to between R4,000 and R6,000 per oz to achieve cash positivity at the current spot prices. This move could be a medium-term positive for Sibanye-Stillwater, although it would require absorbing upfront restructuring costs of potentially R500m. The overall PGM production would not be affected, as Sibanye-Stillwater adjusted its guidance downwards to accommodate the cuts.
RMB emphasized its keen interest in Sibanye-Stillwater’s actions at the Stillwater mine, which primarily produces palladium. The company has implemented cost-cutting measures and does not foresee closing the operation, although it may respond to further margin pressure.
