Sibanye shoots the lights out in March quarter
The world number one platinum supplier has got its debt under tight control after a stellar start to the year and record quarterly performances
The coronavirus virus disrupted a strong start to Sibanye-Stillwater’s year after it reported a record first-quarter operating performance on high prices for metals coming from its platinum group metals (PGMs) and gold mines in SA and the US.
Sibanye, the world's largest supplier of PGMs and which has mines in SA, the US and Zimbabwe, said on Tuesday it had achieved its best quarterly adjusted earnings before income, tax, depreciation and amortisation (ebitda) to date of R11bn in the March quarter, compared to R808m in the same period a year earlier.
A more accurate comparison would be with the December quarter when it notched up adjusted ebitda of R7.4bn.
The March quarter of 2019 was marred by the five-month strike that crippled Sibanye’s gold output and skewed the group’s financial metrics.
One of the most closely watched items in Sibanye’s financials is net debt, which ballooned alarmingly when it bought the Stillwater palladium and platinum assets in the US for $2.2bn cash in 2017.
Given the strong performance in the March quarter, Sibanye’s net debt to adjusted ebitda, which forms the measurement of its debt covenants, fell to 0.75 times from 1.25 times at the end of December. Sibanye has liquidity of R18.3bn, including cash of R16.4bn.
“The group has optimised working capital and increased liquidity and balance sheet flexibility to ensure an appropriately robust financial position. The primary priority remains to lower the group’s net debt position further,” Sibanye said.
Contributing to the performance in the gold division, which is exclusively in SA, was a fantastic safety performance of more than 620 days without a fatality. In 2018, Sibanye had a horrible year with more than 20 people killed on its gold mines.
At its SA platinum division, however, the number of fatalities in the March quarter doubled year on year to four.
The gold mines increased production to 238,076oz in the quarter compared to the 143,278oz in the strike-affected quarter a year earlier. It was lower than the December quarter’s 300,578oz.
The March quarter is traditionally marked by lower production than the other three quarters of the year because of the ramp-up after the long year-end break and slew of public holidays.
The gold price was 35% higher at R795,323/kg, giving the division adjusted ebitda of R1.1bn from a loss of R1.6bn a year earlier.
The gold price has since surged to more than R1m/kg, a record level.
“This has positive implications for earnings and cash flow from the SA gold operations as production continues to ramp up in accordance with the amended Covid-19 regulations issued in terms of the Disaster Management Act,” Sibanye said.
Sibanye’s underground mines will only reach 50% of capacity during May after closing in the last week of March in line with government directives.
The local platinum mines pushed up production of the four main metals in the PGM basket — platinum, palladium, rhodium and gold — nearly 60% year on year to 418,072oz in the quarter.
Sibanye bought the Lonmin group and its PGM mines and those assets, now called Marikana, are included in the production.
The all-in sustaining cost of production increased to R16,745/oz, up from R11,841/oz a year earlier. This was largely a result of the move to toll treatment of its concentrate at Anglo American Platinum rather than selling its concentrate to its peer.
The Marikana assets also had a higher cost than the other mines in the group.
In the quarter, Sibanye sold 522,843oz of the four metals, which was a quarter higher than a year ago and reflected the sale of extra metal ahead of the lockdown in SA on March 27 when the entire country was brought to a standstill to curb the spread of the coronavirus.
On April 18, the lockdown restrictions were eased and mining companies were allowed to return to 50% of capacity at their underground mines and full operations at their surface assets under strict guidelines and controls.
In the US, mined production of palladium and platinum as well as recycling of old autocatalysts generated 363,383oz of PGMs at an all-in sustaining cost of $894/oz.
The average prices for palladium and platinum during the quarter was $2,053/oz, giving it a large profit margin.