Precious metals miner Sibanye-Stillwater has been upgraded by Moody’s Investors Service to Ba2 with a positive outlook, with the agency citing the group’s disciplined capital allocation over the past two years.
The upgrade from Ba3 still has Sibanye-Stillwater in a category considered below investment grade, meaning that its business continues to have speculative elements. Ba2 is the second-highest speculative grade rating.
Moody’s said in its note that the company’s rating still reflected its exposure to volatile commodity prices and its exposure to the rand, as well as merger and acquisition risks as it pushes into battery metals. The miner continues to have gold operations consisting of mature mines with high costs, and also faces operational, social and regulatory risks, the agency said in a note on Friday.
While there is a labour strike at Sibanye’s SA gold operations that has been under way since March 9, the company has the capacity to absorb the strike-related losses, due to its strong earnings from the platinum group metals (PGM) operations and given that it has a solid liquidity with no upcoming debt maturities, Moody's noted.
Moody’s has also taken the view that while the upcoming wage negotiations in late 2022 at Sibanye’s key PGM operations are likely to be challenging and remains an operational risk, they will be concluded without any significant disruptions, as was the case in 2019, the agency said.
Sibanye, valued at R152bn on the JSE, gets more than 80% of its production from SA, with gold accounting for 8% of its core profit in 2021.
The group had booked a record R33.1bn in profit in 2021, with the sector reaping the benefits of record prices for many PGMs. The group paid out R13.8bn in dividends, with its final dividend at the upper-end of its payout ratio, or 35% of normalised earnings. At the end of December the group had net cash of R11.5bn, and had also bought back R8.5bn, or 5%, of its shares in 2021.
Moody’s noted that the “rating action reflects the strong financial performance that Sibanye has displayed over the past two years and its track record of maintaining capital allocation discipline”.
“We are pleased that the market is starting to recognise our transition from a single commodity mining company in 2013 to a growing multinational mining and metals group, with a diverse portfolio of mining and processing operations, projects and investments across five continents,” CEO Neal Froneman said in a statement.
By the JSE’s close on Tuesday Sibanye’s share price was little changed at R55.88, having risen 13.81% so far in 2022, and 48% over the past two years.
Over the same period of time the JSE’s precious metals index has risen 3.78% and 42.1% respectively.
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