Sibanye-Stillwater Reduces Production at US Mine, Secures New Metal Sales Deals
Sibanye-Stillwater is cutting production at its US-based Stillwater palladium/platinum mine by 200,000 ounces per year and is close to finalizing additional prepayment deals on gold, chrome, and platinum, which could generate between $600 million and $700 million.
These measures aim to strengthen the miner’s balance sheet after a challenging operating period that saw negative free cash flow of R7 billion in the first half of the year, leading the company to withhold its interim dividend.
The company’s financial difficulties were primarily driven by persistently low prices for platinum group metals (PGMs), resulting in non-cash impairments of R7.5 billion.
As outlined in its recent trading statement, Sibanye-Stillwater’s basic earnings for the first half of 2023 fell by over 100%, resulting in a taxed loss of R7.1 billion, compared to a profit of R7.8 billion in the same period last year.
Net debt increased by R6.8 billion, bringing the total to R18.7 billion. As of June 30, the company’s net debt to adjusted EBITDA ratio stood at 1.43x, still well within the revised covenant limits of 3.5x until June 2025 and 3x from July 2025.
Sibanye-Stillwater reported R13 billion in additional debt headroom, assuming its annualized EBITDA remains at R13 billion for the rest of the year. The company’s total liquidity increased by R25 billion ($1.4 million).
Further deleveraging is expected in the next six months as the company finalizes additional metal sales agreements. These agreements will include prepayments for chrome, gold, and PGMs from Sibanye-Stillwater’s South African operations.
In August, the company secured a R1.8 billion prepayment for the delivery of 48,129 ounces (1,497 kg) of gold over 25 months, beginning in October 2024.
Job Cuts at Stillwater Mine
Despite efforts to improve all-in sustaining costs (AISC) at its Stillwater mine, Sibanye-Stillwater announced plans to reduce its workforce by 800 employees and contractors.
The company will also cut annual production to about 200,000 ounces by 2025. The Stillwater West mine will be placed on care and maintenance, while high-grade output will continue from the Stillwater East section.
Stillwater is expected to produce between 440,000 and 460,000 ounces of 2E (palladium and platinum) by the end of the year. In the first half of 2023, Stillwater produced 238,139 ounces at an AISC of $1,343/oz, significantly higher than the group’s average. CEO Neal Froneman acknowledged that placing the entire Stillwater operation on care and maintenance would have been more costly.
Sibanye-Stillwater is conducting a fundamental review of its Stillwater operations to reduce AISC to around $1,000 per 2E ounce, with restructuring plans underway.
Sandouville Refinery Faces Challenges
Sibanye-Stillwater also faced difficulties at its Sandouville nickel refinery in France, which posted a $15 million loss—57% lower than the previous year.
The refinery’s supply contract was terminated early, costing the company $37 million. Nickel production increased by 22% to 4,270 tons, while sustaining costs fell by 37% to $23,684/ton.
The company is currently studying the feasibility of producing precursor cathode active material (pCAM) for nickel sulfate at the refinery under its GalliCam Project. A pilot plant and definitive feasibility study are expected to follow.
South African Operations and Lithium Expansion
Sibanye-Stillwater completed major restructuring efforts in its South African platinum and gold operations in the second half of last year, resulting in R6.6 billion in cost savings. Additional savings of R461 million are expected from restructuring the Kloof 2 plant and other services.
The company downgraded its gold production guidance for 2023 to between 530,000 and 563,000 ounces, down from last year’s 646,680 ounces.
Sibanye-Stillwater also expanded its revolving credit facility to R6 billion and secured a €500 million (R10 billion) “green” financing package to support its Keliber lithium mine project in Finland. CEO Froneman noted that despite an oversupply of lithium, demand for the mineral is expected to rise significantly.
As of 1:30 PM South African time, Sibanye-Stillwater’s shares were trading 10% higher on the Johannesburg Stock Exchange, buoyed by a 1.48% rise in the palladium price, with platinum and gold prices also trending higher.
