Sibanye unveils R6.8bn of new SA projects and top dividend

Sibanye-stillwater rewarded investors with a fat dividend and announced it would invest R6.8bn in growth projects in SA platinum group metals (PGM) and gold assets, creating thousands of new jobs.

Sibanye, the world’s largest source of PGM, said it was creating 7,000 jobs in SA through its investment programme, which includes a R3.9bn investment in finishing the partially built K4 mine it acquired when it bought Lonmin.

The second project is the Burnstone gold mine in Mpumalanga, which is fully built but needed to be replanned and re-equipped to change from the previous owner’s, Great Basin Gold’s, mechanised mining model to a more conventional, labour-intensive process.

These investments appear to run contrary to Sibanye CEO Neal Froneman’s comments that the company would not spend large amounts of capital in SA.

Froneman, however, pointed out on Thursday that these projects had been built by previous owners and Sibanye was merely finishing them off. The third project is an opencast PGM mine with a three-year life. They all had “extremely strong” profit metrics that made them viable.

“The commitment to invest approximately R6.8bn in the three major capital projects approved by the board should not be construed as a vote of confidence in the investment climate in SA,” Froneman said.

“Continued policy uncertainty, combined with other risks, such as those related to the reliability of water and power availability and the uncertain outlook for electricity costs, as well as risks of social disruption and inefficient regulatory processes are ongoing deterrents to significant investment,” he said.

“The projects we have approved are among the best in the industry due to specific characteristics, which enhance their attractiveness and supported the investment decision,” he said.

Sibanye reported full-year attributable profit of R29.3bn from its mines in SA, Zimbabwe and the US, up from R62m the year before.

It said its free cash flow for the year to end-december was a record R19.9bn, leaving the company in a net cash position of R3bn at the end of the period after years of prioritising the reduction of debt.

Froneman said 2020 was “a defining year for the group, marking the end of the deleveraging phase that has prevailed over the past three years”.

“Despite the significant challenges associated with the Covid-19 pandemic, the group delivered a record financial performance and made notable progress towards delivery on many strategic targets,” he said.

Sibanye declared full-year dividends of R10.7bn or 371c, which is the top end of its dividend policy of paying between 25% and 35% of normalised earnings.

After Sibanye’s heady growth spurt in PGM, most notably the $2.2bn (R38bn) cash purchase of Stillwater in the US in 2017, debt had become one of the most closely watched metrics in the company’s results.

During 2020, Sibanye cut its borrowings by R5bn to R18.4bn, while cash grew to R20bn.

The debt covenant measure of net debt or cash to adjusted earnings before interest, tax, depreciation and amortisation (ebitda) is central for investors. With adjusted ebitda growing more than three times and Sibanye moving into a net cash position, the company is poised for growth.

The cash-flush company plans to create 7,000 jobs with two large gold and PGM mining projects in SA but remains critical