Sibanye-Stillwater saved up to 10,000 jobs by backing away from a decision to close up to 300,000oz of annual platinum group metal (PGM) production from its Rustenburg mines, saying it was on track to save R1bn at the mines.
This news will not cheer the platinum market, which needs a reduction in metal coming from SA, the world’s largest supplier. Sibanye’s decision is indicative of the unwillingness of producers to make serious production cuts to stimulate prices.
Sibanye had done the work to save its three deep-level conventional mines from closure and while the news was not great for the market it meant unit costs of production were lower and the mines were headed for breakeven or profits, said spokesman James Wellsted.
Sibanye’s shares closed 2.4% higher at R16.49 each.
The news comes at a time when the company is in talks with organised labour at its Beatrix West and three Cooke shafts to close the operations at a cost of up to 10,000 jobs.
Sibanye will probably allow the formal talks to run their course before considering options around selling one or both of the mines. This process has been made slower by concerns from mining firms about unqualified owners destroying assets and jobs.
Sibanye was "not a charity" for other platinum producers by taking metal out of the market if it had no reason to shut its South African platinum mines because they were no longer unprofitable, Wellsted said.
The palladium price, which has been higher than that of platinum only three times in history, broke through $1,000/oz on Monday, while platinum languished at $940/oz.
Sibanye CEO Neal Froneman talked tough after taking ownership of the Rustenburg mines from Anglo American Platinum, telling the market the company would not tolerate loss-making ounces in its platinum portfolio. The board gave the assets until the end of 2017 to improve or face selective suspension, which could cut PGM output by 200,000 to 300,000oz a year.
On Monday, however, Sibanye said its work at the mines had averted the closure of marginal shafts. Instead of cutting output, Sibanye had revised its full-year PGM production for 2017 from its mines in SA and Zimbabwe upwards by 50,000oz. It had also revised its cost-cut target to R1bn in 2017, up from an R800m target spread over three years.
"This is significantly earlier than the three-year period we had initially guided to realise these benefits," Froneman said.
"While we anticipate further opportunities to reduce costs and unlock operational synergies over time, the South African PGM operations are now well positioned to benefit from firmer PGM prices," he said.
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