Sibanye cuts debt, eyes first-half dividend

Sibanye-Stillwater, bearing the scars of a five-month strike at its gold division, swung back into profit for 2019 helped by higher metal prices for precious metals and by its large platinum group metals (PGMs) output.

Sibanye, the world's biggest PGMS producer, posted a taxed  profit of R433m for the year to end-December 2019, compared with a R2.3bn loss the year before.

It was a year of two halves, with a second-half profit of R604m compared with a first-half loss of R171m.

Before the tax line on the income statement, which showed a R3.6bn benefit from deferred tax, Sibanye showed a R1.3bn loss compared with a R1.4bn loss the previous year.

With more than R23bn of debt on its books, Sibanye paid interest during the year of R3.3bn, slightly more than the R3.1bn it paid the year before. Sibanye has a market capitalisation of R118bn.

Revenue of R73bn from its PGMs businesses in SA, Zimbabwe and the US with its gold mines in SA, overshadowed the R51bn of the year before.

Marikana

Sibanye had the benefit of the former Lonmin assets it bought during 2019 in a R4.3bn all-share deal. The assets, now renamed Marikana, contributed R11bn in revenue to Sibanye and R1.9bn in net profit in the seven months it has been in the company. Production from its SA platinum mines increased by nearly 40% to 1.6-million ounces of four platinum group elements, showing the addition of Marikana.

The SA PGMs division posted adjusted earnings before interest, tax, depreciation and amortisation (ebitda) that increased more than threefold in the second half of the year to R6.8bn because of high metal prices compared to R2bn in the first half. Sibanye noted that the prices of the four PGMs had increased by another 38% so far in 2020.

The most closely watched metric in Sibanye’s results is its net debt to adjusted ebitda, one that its lenders have used in covenants to assess the company’s ability to repay its loans.

That ratio has fallen to 1.25 times, well within the covenant limits set by lenders when Sibanye made the audacious $2.2bn cash takeover of Stillwater Mining, a palladium and platinum miner in the US. In June 2019, the ratio was 2.5 times. Sibanye had a target of 1.8 times for the end of the year.

Suspended dividends

If the strong performance seen in the second half of the year continues, Sibanye says the ratio “should fall below one time by midyear”.

“This is without considering the effects of reductions in net debt that should be achieved through application of free cash generated to repaying debt,” Sibanye said.

CEO Neal Froneman said Sibanye-Stillwater “expects to resume dividend payments in first-half 2020, based on the current deleveraging trajectory and subject to current commodity prices”. The company suspended its dividends in 2016 as it focused on repaying debt.

Sibanye generated net cash from its operations of R9.5bn, down from the R12.2bn the year before, with the gold strike that ended in April weighing heavily on the group as it only returned the division to normalised production in the fourth quarter.

On the balance sheet, the company is healthy, with its current assets exceeding its current liabilities — costs falling due in 12 months — by nearly R12bn. Total assets were R31bn more than total liabilities.

The gold division posted an adjusted ebitda loss of R969m for the year, with the first half’s R2.94bn loss offsetting earnings of R1.97bn in the second half as the operations normalised after the strike called by the Association of Mineworkers and Construction Union (Amcu) that ended in April.

seccombea@businesslive.co.za