Sibanye’s good fortune draws Amcu’s outrage

Company says profit from its platinum mines is helping it weather protracted gold mine strike

Sibanye-Stillwater has told investors that it is weathering the protracted and deadly strike at its SA gold mines thanks to growing profits from its US and SA platinum mines, which now account for more than 80% of profit.

In a strategic update issued on Thursday, Sibanye said efforts to diversify its business, both in terms of the commodities it mines and the geographies in which it operates, means the disruptions at its gold division, where the Association of Mineworkers and Construction Union (Amcu) has been on strike since November, have been offset by its platinum group metal (PGM) operations.

Sibanye, which was created in 2013 after Gold Fields spun off most of its costly deep-level SA gold mines, started buying local platinum assets in 2015. It diversified into the US with the purchase of Stillwater in 2017.

But the rosy market update, which sent the company’s share price to its highest intraday level in nearly 12 weeks, has drawn the ire of Amcu, which accused the company of shocking “arrogance” and “disingenuous lies”.

Sibanye’s update indicates that the company may have even benefited monetarily from the strike.

While it lowered its production guidance only slightly, the company benefits from savings on its wage bill. Workers who are not reporting for work are not paid, with “wages generally accounting for around 50% of operating costs at the deep-level gold mines”, the company said.

Gold production for 2018 was expected to be about 34,600kg, only slightly missing its previous guidance of between 35,000kg and 36,000kg, thanks to its effective strike plan, Sibanye said. The company had also benefited from higher PGM prices, it said.

In SA, robust palladium and rhodium prices, together with the weaker rand-dollar exchange rate, “boosted the rand platinum group metals basket

price by 19% during the course of the 2018 year to more than R15,700 an ounce, significantly enhancing revenue”, the company said.

The palladium price has increased more than 75% from $744 an ounce to more than $1,300 an ounce since Sibanye announced it would acquire Stillwater in December 2016.

In the third quarter of 2018, before the strike started, Sibanye said the profit contribution from its platinum mines had grown to 85% of the group’s total.

Amcu said for the company to brag about its profits was “utterly reckless” and “flies in the face of the socio-economic inequality which is so rife at Sibanye-Stillwater’s operations”. The union said despite the company’s claims of poverty, the update proved “they can truly afford to pay their workers a living wage”.

The strike has been ongoing since November 21 and has claimed four lives, after Sibanye-Stillwater extended a wage deal made with the National Union of Mineworkers, Uasa and Solidarity to all workers including Amcu members.

The mining company said the membership of the three unions accounted for more than 50% of its workforce, which had allowed it to extend the agreement to Amcu.

The labour court, however, ordered the Commission for Conciliation, Mediation and Arbitration to facilitate a union membership verification process at the company, which is under way.

Hurbey Geldenhuys, head of research at Vunani Securities, said while Sibanye was viewed by many market participants as a deep-level gold miner in SA and was priced as such, it should in fact be viewed as a PGM miner, with its key asset, Stillwater mine, one of the best in the world.

“Stillwater is safe, mechanised and highly profitable. It has a significantly larger exposure to palladium than any of its SA peers and palladium is trading at all-time highs.

“Stillwater is in the lower cost quartile of the PGM miners and its Blitz expansion will cement this further,” he said.

THE PALLADIUM PRICE HAS INCREASED MORE THAN 75% FROM $744 AN OUNCE TO MORE THAN $1,300 AN OUNCE SINCE DECEMBER 2016