Sibanye-Stillwater reported a R7bn loss in the six months to end-June, from a R7.8bn profit in the first half of 2023, with the group announcing plans to restructure its mines in Montana, slashing production of palladium and platinum from the assets by up to 45% in a bid to return the assets to profitability.
The company’s interim loss follows a 2023 full-year loss of R37bn reported in March as soft platinum group metals (PGM) prices eat into the bottom line.
The group’s adjusted earnings before interest, tax, depreciation and amortisation (ebitda) in the six months under review plunged 53% to R6.6bn, with the SA PGM operations accounting for 94% of this decline.
The company on Monday said it will reduce output at its Stillwater mine by 200,000oz a year in 2025 from this year’s output forecast of between 440,000oz and 460,000oz, having first contemplated putting the asset under care and maintenance.
The decision to slash production was accompanied by an announcement of a further 800 employee and contractor job losses at the mine.
Sibanye bought US-based Stillwater Mining Company in 2016 for $2.2bn, creating a combined group now called Sibanye-Stillwater.
The group’s SA PGM operations, which recently let go of more than 2,500 workers, remained profitable despite the decline in prices, partly offset by the 3% depreciation of the rand versus the US dollar year on year.
CEO Neal Froneman said the cost benefits from operational restructuring implemented since 2022 are beginning to come through in improved financial and operating results for most of the group operations, preserving cash flow through the low-price environment.
“Our fundamental position regarding the longer-term outlook for the metals we produce and battery metals we will produce remains unchanged, with a considered and measured strategic response to the cyclical downturn in commodity prices. Our strategic focus is to ensure consistency through price cycles and our decisions are not taken based on short-term factors,” Froneman said.
“We are confident that our strategic interventions to secure operational sustainability and protect our balance sheet will ensure that the group will not only prevail through the current low-price cycle but emerge exceptionally well positioned to benefit from a recovery in metal prices. Our strategy remains relevant and appropriate, and we are confident that we are well positioned for longer-term value creation.”
The upbeat outlook by Froneman was well received by the market, with the group’s stock up almost 10% on the day.
Demand for PGMs, used mostly for internal combustion engines, has come under pressure due to the rise in popularity of battery electric vehicles (BEVs), leading to softening prices.
SA, the world’s biggest platinum producer, has borne the brunt of plunging PGM prices over the past year. In response, producers have been intensifying their efforts to cut costs and trim capital budgets as margins become tighter.
Impala Platinum, which recently wrote down R20bn in the value of its assets, has let go of about 4,000 workers as the sector battles low prices and surging costs. Anglo American Platinum, which is being unbundled by Anglo, is also planning to cut 3,700 jobs in SA in a bid to reduce costs by R5bn.
Sibanye-Stillwater’s SA gold production of 10,703kg for the period under review was 17% lower than the previous period.
The group, one of the largest private sector employers in SA, said the development of the Keliber lithium project progressed well during the period, with the refinery the most advanced, while the earthworks for the concentrator and the mines have also commenced.
Sibanye-Stillwater’s lithium project in Finland last month secured a €500m (R9.9bn) cash injection via a green loan package, marking a big milestone for the project.
Froneman said the group has continued to invest in the development of the Keliber lithium project and is strategically positioned to supply locally produced lithium hydroxide (LiOH) necessary for the future development of the BEV sector in Europe.
“Despite the current oversupply of lithium, even under more moderate BEV growth assumptions than current market consensus, our analysis suggests that demand for lithium will continue to rise significantly.”
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