Sibanye swings to R37bn loss after big drop in metals prices

Despite the welcome lift in gold prices, precious metals producer Sibanye-Stillwater announced on Tuesday that it swung to a loss in the year to end-December after a 33% yearon-year decline in the average platinum group metal (PGM) basket price.

The company reported a loss of R37.4bn for the year, compared with a R19bn profit in 2022. The largest contributor to this was impairments of R47.5bn against various assets due to the plunge in metals prices. It decided to declare no final dividend for the year after paying an interim dividend of 53c per share. In 2022 Sibanye paid a total dividend of R2.60 per share.

Sibanye is one of the largest producers of gold and platinum globally. Its gold operations in SA benefited from production increasing by 30% to 25,200kg and a 21% rise in the average gold price to R1.15m/kg.

But the “substantial declines in the prices of most commodities and persistent cost inflation translated into materially lower earnings and cash flows”, Sibanye said.

The 33% year-on-year decline in the average PGM basket prices resulted in a “dramatic fall” in the profitability of its PGM operations in the US and SA, which in recent years contributed the bulk of group earnings and cash flow.

Headline earnings per share were down 90% to 63c.

Group adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) for 2023 fell to R20.6bn. That was 50% lower than adjusted ebitda of R41.1bn for 2022, which was in itself a 40% decline from record levels of R68.6bn for 2021, which marked the peak of the commodity price cycle.

PGM prices weakened in 2023 despite an increase in automotive demand, which accounts for roughly two-thirds of total PGM demand.

PGM miners have said the increase in automotive demand did not result in an equal rise in sales because car companies added to their inventories of PGMs in the first half of 2022 fearing supply disruptions due to the Russia/Ukraine war.

Sibanye CEO Neal Froneman said on Tuesday the “precipitous decline” in PGM prices during the first half of 2023 was partly due to the “unexpected destocking of inventory, which caught the market by surprise, causing increased uncertainty and market anxiety”.

Unlike some PGM miners — such as Northam, which expects PGM prices to remain under pressure for some time — Froneman said Sibanye was confident that the price weakness during 2023 did not signal a structural change and was only temporary. “We are beginning to see increasing signs which support a better demand outlook,” he said.

However, similar to other PGM miners in SA, Sibanye has started to implement cost-saving measures, which are expected to deliver about R6.6bn in cost and capital savings.

This included last year’s closure of Kloof 4 shaft at its gold operations near Carletonville, which resulted in over 1,000 job losses — 575 employees were retrenched and 550 accepted separation packages.

It has also begun restructuring its SA PGM operations, which may affect thousands of jobs. This will include the closure of the Simunye shaft at the Kroondal operation, conditional operations of the 4 Belt shaft at Marikana, and “rightsizing” of Siphumelele shaft in the Rustenburg operation and the Rowland shaft at Marikana.

“We recognise, however, that if low commodity prices persist, earnings are going to remain

under pressure and, with ongoing inflationary cost pressure, there may be further restructuring required. We have a strong balance sheet as a buffer but will continue to manage our financial position in terms of our earnings and cash flow,” Froneman said.

However, he told investors on Tuesday that while Sibanye was prepared for lower earnings in 2024 and intended to be “circumspect” about mergers & acquisitions, it did not want to “miss out on countercyclical opportunities to diversify and grow [its] global portfolio”.

The company’s share price on the JSE ended 5.7% weaker at R18.22. It has lost about 50% of its value over the past 12 months. Other platinum miners also saw double-digit drops in their share prices over the past year. Anglo American Platinum decreased by 30%, Impala Platinum by 65% and Northam Platinum by 36%.