Sibanye beats debt-reduction target as precious metals surge
The miner expects to return to profit in its year to end-December, benefiting from a surge in precious metal prices
14 February 2020 - 13:51
bykarl gernetzky and allan seccombe
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Surging precious metal prices helped Sibanye-Stillwater beat its debt-reduction targets in its year to end-December, when the miner returned to profitability.
The acquisitive miner said in a trading update on Friday that it expects to report a profit of R433m to end-December from a loss of R2.5bn previously, after revenue more than doubled due to acquisitions and higher commodity prices.
Palladium prices increased by more than 50% during 2019 and have shot up another quarter so far this year to unprecedented highs of $2,439/oz. Rhodium prices more than doubled during 2019 and platinum prices edged up by a fifth.
The company also benefited from its stake in DRDGold, with revenue from that acquisition being included for a full year, as opposed to five months in the prior comparative period. It also benefited from the inclusion of seven months of production from the Marikana operations it acquired from Lonmin.
Group revenue rose 44% to R72.92bn.
“As a result of this strong financial performance, progress on deleveraging the group balance sheet has accelerated,” Sibanye said.
Net debt to earnings before interest, taxation, depreciation and amortisation (ebitda) fell to 1.2 times at year end, with the miner having targeted a ratio of 1.8 times.
The net debt to ebitda metric is the one used by lenders to judge Sibanye’s compliance with loan covenants and its ability to repay borrowings, making it a closely watched ratio by the market.
Sibanye, which has grown its platinum group metals (PGM) division from nothing to the world’s largest in four years, took on hefty debt when it paid $2.2bn (about R32.65bn) cash for US-based Stillwater Mining, a palladium and platinum producer, putting its balance sheet under pressure and resulting in dividends being halted.
Sibanye CEO Neal Froneman said earlier in February that the accelerated pace of repairs to the miner’s balance sheet was paving the way for a resumption of dividends in mid-2020. Sibanye last paid a dividend in 2016.
In afternoon trade on Friday, Sibanye’s share price was up 5.66% to R41.54, having more than tripled over the past two years.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Sibanye beats debt-reduction target as precious metals surge
The miner expects to return to profit in its year to end-December, benefiting from a surge in precious metal prices
Surging precious metal prices helped Sibanye-Stillwater beat its debt-reduction targets in its year to end-December, when the miner returned to profitability.
The acquisitive miner said in a trading update on Friday that it expects to report a profit of R433m to end-December from a loss of R2.5bn previously, after revenue more than doubled due to acquisitions and higher commodity prices.
Palladium prices increased by more than 50% during 2019 and have shot up another quarter so far this year to unprecedented highs of $2,439/oz. Rhodium prices more than doubled during 2019 and platinum prices edged up by a fifth.
The company also benefited from its stake in DRDGold, with revenue from that acquisition being included for a full year, as opposed to five months in the prior comparative period. It also benefited from the inclusion of seven months of production from the Marikana operations it acquired from Lonmin.
Group revenue rose 44% to R72.92bn.
“As a result of this strong financial performance, progress on deleveraging the group balance sheet has accelerated,” Sibanye said.
Net debt to earnings before interest, taxation, depreciation and amortisation (ebitda) fell to 1.2 times at year end, with the miner having targeted a ratio of 1.8 times.
The net debt to ebitda metric is the one used by lenders to judge Sibanye’s compliance with loan covenants and its ability to repay borrowings, making it a closely watched ratio by the market.
Sibanye, which has grown its platinum group metals (PGM) division from nothing to the world’s largest in four years, took on hefty debt when it paid $2.2bn (about R32.65bn) cash for US-based Stillwater Mining, a palladium and platinum producer, putting its balance sheet under pressure and resulting in dividends being halted.
Sibanye CEO Neal Froneman said earlier in February that the accelerated pace of repairs to the miner’s balance sheet was paving the way for a resumption of dividends in mid-2020. Sibanye last paid a dividend in 2016.
In afternoon trade on Friday, Sibanye’s share price was up 5.66% to R41.54, having more than tripled over the past two years.
gernetzkyk@businesslive.co.za
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