Diversified mining and metals group Sibanye Stillwater is in line for a tax windfall of more than R4bn thanks to an amendment to US tax rules that will boost its loss-making platinum and palladium operations in that country.
The company is also reaping the rewards of the gold price rally, and for the first time since 2017, its profits from South African gold operations have exceeded those from local platinum group metals (PGMs).
Late in 2024, the US treasury introduced section 45X of the Inflation Reduction Act to bolster US mining operations by providing tax relief for operational costs for producers of critical minerals. It gives a 10% credit to producers and recyclers of PGMs.
However, these tax credits — introduced under former president Joe Biden — could be undone by the Trump administration’s aversion to clean energy.
Sibanye has two PGM operations at Stillwater and East Boulder in Montana, where it mines platinum and palladium. It also owns the Columbus Metallurgical Complex in Montana. It further runs a precious metal recycling facility at Reldan in Pennsylvania where industrial and electronic waste is processed to produce green precious and base metals.
In its latest integrated annual report, the group estimated that the possible section 45X tax credit benefit for the 2023 and 2024 financial years was a combined R3.6bn, as the rules allow the miner to claim credits retrospectively.
“The rules are retrospective with combined credits relating to the 2023 and 2024 financial years estimated at approximately US$120m [R2.2bn] and US$90m [R1.6bn] respectively.”
It further estimates that its US PGM operations are in line for tax credits of $30m [R547m] in 2025, equivalent to a $110 reduction in production costs per ounce for platinum and palladium.
“The tax credit will reduce costs and improve profitability of the loss-making US operations,” it said.
Sibanye acknowledged in its integrated report for the half year ending December 2024 that there was uncertainty around these benefits under the Trump administration, but it was confident its PGM operations would still be allowed to benefit due to “a compelling case” for domestic production in the US.
“The change in the US administration in January 2025 has introduced some uncertainty regarding the section 45X regulations. The increasing imperative for national security of critical minerals supply, which includes palladium, through local supply chains, provides a compelling case for continued support for domestic production in the US,” the company said.
The South African gold operations are highly leveraged, and should the gold price remain elevated as we expect, profits from the South African gold operations for 2025 could increase materially
— Sibanye-Stillwater
Sibanye-Stillwater spokesperson JamesWellsted told Business Times on Friday that the tax credit benefit highlighted the anticipated value from the group's strategic positioning.
"The significant decline in PGM prices posed a risk to the economic sustainability of Sibanye-Stillwater’s US PGM operations in Montana and the group actively engaged with various government bodies to ensure understanding and appreciation of the strategic importance of sustaining these operations, which are the only significant source of PGMs in the USA, and are classified as critical metals," Wellsted said.
In a trading statement released in February, the miner announced it would write down its US-based Stillwater mine by about R8.79bn. It said the impairment stemmed from a decision announced in 2024 to cut production at Stillwater as the outlook for the palladium price had deteriorated. It had earlier announced plans to cut production by 200,000 ounces and said it would reduce its headcount by 800.
Wellsted said the US operations were being restructured to make them profitable.
"It means 10% of our mining costs at the mine and 10% recycling costs should be recovered through payments and credits from the US government," he said, which would significantly improve the financial outlook for the US PGM operations and the long-term sustainability of a strategically important primary producer of critical metals in the US,” he said.
“It means 10% of our mining costs and 10% recycling costs will be removed through money back from the government.”
So far, there were no indications that the Trump administration would end the credits,
Sibanye-Stillwater, which has a market capitalisation of R57.4bn, was established in 2013 after Gold Fields’ unbundling of its ageing gold mines. It expanded into PGMs through various acquisitions, including the purchase of Stillwater in the US in 2017 and later Lonmin in South Africa.
However, due to the depressed platinum environment, the Stillwater West mine has been placed on care and maintenance.
The company announced the restructuring of the operation to cut operating costs from the US PGM operations for 2025 by about $140m and capex by $50m compared with 2024.
While its platinum operations are experiencing upheavals, Sibanye is reaping the rewards of the rallying price of gold — an asset considered a safe haven when there is uncertainty in the markets.
It announced that in the six months to December, South African gold operations had for the first time since 2017 contributed more to ebitda (earnings before taxation depreciation and ammortisation) — a measure of a company’s core operating performance — than its local PGM operations.
“This marks a notable turnaround from previous years when the South African PGM and US PGM operations comprised 80% to 90% of group earnings and sustained the group during a seven-year period when the South African gold operations experienced significant operational disruptions.”
The gold price has been climbing due to geopolitical tensions and is currently at around $3,300/oz.
At the spot gold price of about R1.7m/kg in February 2025, all of its leveraged South African gold operations were profitable at an all-sustaining cost margin of 27%.
With the spot gold price now above R2m/kg, the miner expects to report record profits in 2025.
“The South African gold operations are highly leveraged, and should the gold price remain elevated as we expect, profits from the South African gold operations for 2025 could increase materially,” said the group.
The company reported that founding CEO Neal Froneman, who will be retiring at the end of September, had received a R50.8m pay packet in 2024, down from R56.3m a year earlier. This is still way off the R198m pay package he received several years ago.
Meanwhile, Sibanye warns that illegal mining, crime, community unrest and extortion were real threats to its operations in South Africa and had potentially fatal consequences for the country’s entire mining industry.
“Illegal mining is linked to organised crime, with syndicates threatening our employees and community members with violence. Our operations are also sometimes threatened by ‘bogus business forums’ that try to extort tenders and employment opportunities through illegitimate protest action.
“All of the above can lead to financial losses and reputational harm. At worst, we could be forced to suspend or close down certain operations. We have various measures in place to engage stakeholders, collaborate with authorities, leverage technology and innovation, and mitigate security risks before they get out of hand,” the miner said.
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