Sibanye-Stillwater, SA’s largest private sector employer, has secured an increased debt capacity of its revolving credit facilities (RCF), which include $1bn and R5.5bn, after a plunge in earnings.
Sibanye had asked its lenders for a temporary increase following a substantial decline in first-quarter earnings.
The group’s adjusted earnings before interest, taxes, depreciation, and amortisation (ebitda) plummeted from R7.7bn to R2.14bn in the quarter, driven by a slump in platinum group metals (PGM) prices.
The company attributed the price decline to temporary factors and reassured stakeholders that there were no fundamental market shifts to justify the collapse, Business Day previously reported.
Sibanye also recorded an 18% decrease in gold production from its SA operations, mainly due to the phased closure of some of its shafts.
In an announcement on Friday, the mining giant disclosed that lenders of its revolving credit facilities had agreed to raise the covenant limits. This adjustment allows the company to carry more debt without violating loan agreements or incurring penalties, effectively easing its financial pressures.
“Lenders, comprising 11 international banks and four SA banks, agreed to uplift the leverage covenant limit for all facilities from the current 2.5x net debt to adjusted Ebitda, to 3.5x for the period from 30 June 2024 to 30 June 2025 inclusive, and to 3.0x for the period from 31 July 2025 to 31 December 2025 inclusive,” it said.
“Similarly, the interest cover covenant has been amended in line with the leverage covenant and the $1bn RCF has been amended to include a letter of credit facility and an ancillary facility, in order to improve the facility’s flexibility and application.”
The plunge in core earnings in the first quarter followed a R37bn loss in the year ended December 2023 — a complete reversal from the R19bn gain it reported in the 2022 financial year.
This is as PGM prices tanked 33% in the 2023 financial year.
Sibanye CEO Neal Froneman expressed confidence in the company’s resilience and prospects despite the current downturn.
“We have previously stated our intentions to uplift our debt covenants along with pre-emptively evaluating various non-debt capital instruments such as pre-pays and streams, in order to secure the integrity of our balance sheet through the commodity price cycle, if required,” Froneman said.
“The additional headroom resulting from the uplift provides further financial flexibility and should provide the market with increased confidence in the outlook for the group.”
He said that although the leverage was currently well below the existing covenant limits, the additional headroom provided by the new agreement would offer further financial flexibility to bolster market confidence in the company’s long-term outlook.
The company also informed shareholders that the board had approved a resolution to amend the guarantee of indebtedness for group members under the Facilities.
This guarantee constitutes the provision of financial assistance to related and interrelated companies, exceeding one-tenth of 1% of the company’s net worth of R60.7bn.
It said the board was confident that the company remained solvent and liquid, and that the terms of the financial assistance were “fair and reasonable”.
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