Soaring precious metal prices allowed Sibanye-Stillwater to report a near five-fold increase in adjusted earnings before interest, tax, depreciation and amortisation (ebitda) in the first quarter.
The mining giant, with its prominent gold and platinum group metal (PGM) operations in South Africa and the US, has been one of the biggest beneficiaries of the geopolitical uncertainty that has roiled commodity markets in recent months.
In the three months ended March, Sibanye recorded a PGM basket price about 88% higher than in the same period last year, while its average gold price was up by nearly half.
All of this bodes well for CEO Richard Stewart’s goal of cutting the company’s debt in half by the end of next year.
In an investor presentation earlier this year he laid out ambitious plans to cut costs and focus on organic growth opportunities to boost production at the existing assets.
In a statement alongside its first quarter operating update, Sibanye detailed the next step in this plan, which will see the group spend about $750m to buy back outstanding bonds.
The securities it will buy back include all of its outstanding 4% senior notes due this year, valued at $675m, and $75m worth of 4.5% senior notes due in 2029. A new senior note, with some cash reserves, will finance the move.
The group’s cost-cutting strategy has already won an outlook upgrade from ratings agency Moody’s, which foresees a 40% jump in Sibanye’s adjusted ebitda this year amid a continued PGM rally.
In recent months, institutional investing behemoths BlackRock and JPMorgan, with South Africa’s Public Investment Corporation, have substantially upped their stake in the company.
Shares in Sibanye rose on Wednesday as the miner reported a stable operating performance. With costs kept under control, all of its core operations saw earnings growth in the first three months.
The biggest performance gains came from Sibanye’s South African PGM mines, where adjusted ebitda rose 393% to R12.4bn, contributing more than two-thirds of the headline increase, as production rose 2% year on year and costs were unchanged.
Adjusted ebitda at the local gold operations soared 160% to R4.7bn, contributing about a quarter of the overall growth, as rising prices offset a 15% increase in overall operating costs.
Our refreshed strategy is centred on simplification, performance excellence, organic growth and disciplined capital allocation
— Richard Stewart, Sibanye CEO
Quarterly performance metrics at the US assets were less rosy, with unit costs up 14% year on year and production down 5% at the US PGM mines.
These mines are in the process of integrating more mechanisation, causing elevated costs over the next two years but an expected 45% increase in steady-state output in late 2028.
However, further tailwinds came from the company’s US recycling operations, which are a core part of its growth strategy given their role in reducing its environmental impact and garnering policy benefits.
While accounting for a relatively small share of its portfolio, Sibanye’s recycling operations delivered an outsize boost to the overall balance sheet as its three assets (in North Carolina, Montana and Pennsylvania) were fully incorporated and integrated for the first time.
The group recycled 1.34-million ounces of precious metals in the quarter, 138% higher than the same time last year, resulting in a more than nine-fold increase in ebitda to $98m (R1.6bn).
Stewart said the global macroeconomic and sociopolitical environment this year has been marked by “ongoing political upheaval and disruptive market shifts” with commodity price moves “increasingly frequent and accentuated”.
In PGM markets, “near-term volatility will depend on trade policy, Middle East tensions and growing concerns around global economic growth, but medium-term fundamentals are supported by robust autocatalyst demand, limited supply growth and longer-term upside from green hydrogen and new applications”.
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