The world’s biggest platinum group metals (PGM) producer, Sibanye-Stillwater, said on Thursday that unprecedented power rationing and copper cable theft disrupted production during the third quarter, sending its shares down as much as 12%, the most since the early days of the Covid-19 pandemic.
The quarterly production update gives more tangible evidence of the damage inflicted on businesses by Eskom’s unreliable power supply, compounded by copper theft.
Sibanye is also dealing with the fallout of the mid-June flooding in the US state of Montana. Its operations were suspended for seven weeks, resulting in lost production and higher one-off flood recovery costs.
Its US PGM production fell a whopping 40% year on year.
In SA, the company said, copper theft caused power disruptions and exposed its underground employees to potential hazards.
“It’s becoming a more serious problem,” spokesperson James Wellsted said, referring to copper theft. “Firstly from the perspective of safety of people underground and secondly because they cause power disruptions, which results in less production. I can’t give an exact figure on this production, but it is an increasing risk.”
PGM output in the SA operations fell 14% year on year in the three months to end-September. Sibanye said that the deep power cuts in September forced it to reduce concentrator capacity at its SA PGM operations, which affected processed output and sales.
US production may be at the lower end of the estimated range of 445,000oz to 460,000oz for the full year, the company said. The so-called all-in sustaining costs shot up 88% in the US region due to lower production and inflationary cost pressures.
Like its peers, Sibanye is faced with relatively lower prices and rising costs — unlike a year ago — indicating how quickly the commodity cycle can turn from boom to bust. Mining companies had a blockbuster year in 2021 when sky-high metal prices resulted in record profits and dividends.
“It was quite a challenging quarter for Sibanye-Stillwater,” said Seleho Tsatsi, investment analyst at Anchor Capital. “Group adjusted ebitda is down 43% in the third quarter.
“Production volumes are down significantly across the group, particularly for the company’s US PGM operations.”
Industrial action
Its SA gold operations also fared poorly during the quarter because of industrial action earlier in the year. Gold output dropped 30% on an annual basis. Earlier this week, the company announced that it may cut jobs at Beatrix mine in the Free State and the Kloof 1 plant in Gauteng.
On Thursday, its share price ended 10.4% weaker at R39.07 on the JSE, its lowest level in a month, valuing Sibanye at R110.18bn. The shares peaked at R75.40 in March.
The share prices of its peers have also come off their highs, with Anglo American Platinum 38% below its peak of R2,367.35 reached over the same period. Impala Platinum peaked at R294.08 in April 2021 before pulling back to R188.70 by Thursday night.
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