Even as Sibanye-Stillwater pours R6.8bn into two labour-intensive, large mining projects in SA, CEO Neal Froneman said the true potential in the portfolio is lost to the country’s high-risk investment environment.
Froneman is the most outspoken mining CEO and on Thursday none of his frustrations with regulatory uncertainty, fragile state of the economy and Eskom’s high and rising electricity prices and unreliability were in any way diminished despite announcing the investments in the large, partially built K4 PGM mine, and the fully built Burnstone gold mine.
In a presentation to analysts about Sibanye’s stellar annual results, Froneman showed a pipeline of projects, with just three out of six immediately ready projects approved by the company’s board, including a small opencast platinum group metals (PGM) mine with a short life.
“These hurdle rates have only allowed these few projects to be approved. We are appealing to the government to address policies so we as business can make more investments. We have a lot of super projects, but there are only a few that will ever see the light of day under these conditions,” Froneman told Business Day.
It was “urgent” for the government to enact structural reforms, cut debt, implement investor-friendly policies and resolve big infrastructure problems such as Eskom, rail and ports, he said.
In 2020 large business organisations, including Business Unity SA and Business For SA, presented a comprehensive strategy to revive the economy, but Minerals Council SA CEO Roger Baxter noted there had been no movement on these plans despite the desperate need for rapid action.
Baxter told delegates at the recent Mining Indaba that R20bn worth of projects were mired in red tape and slow approvals from the state.
“We have 20 potential projects in various phases of analysis, but I can tell you now that most of them will not meet these current hurdle rates,” Froneman said.
If K4 and Burnstone did not already have shafts and plants, it was unlikely they would be built now, he said.
Sibanye rewarded investors with a fat dividend on the back of record profits coming from higher prices for PGMs and gold, coupled with a weaker rand during 2020.
Sibanye, the world’s largest source of PGM, reported full-year attributable profit of R29.3bn from its mines in SA, Zimbabwe and the US, up from R62m the year before.
It said its free cash flow for the year to end-December was a record R19.9bn, leaving the company in a net cash position of R3bn at the end of the period after years of prioritising the reduction of debt.
Sibanye declared full-year dividends of R10.7bn, or 371c, which is the top end of its dividend policy of paying between 25% and 35% of normalised earnings.
During 2020 Sibanye cut its borrowings by R5bn to R18.4bn, while cash grew to R20bn.
The debt covenant measure of net debt or cash to adjusted earnings before interest, tax, depreciation and amortisation (ebitda) is central for investors. With adjusted ebitda growing more than three times and Sibanye moving into a net cash position, the company is poised for growth.
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