Sibanye hints at closing unprofitable PGM shafts

Diversified mining house Sibanye-Stillwater has warned it might close unprofitable shafts this year if platinum group metals (PGM) prices do not pick up — a move that would lead to further job losses in the sector.

The group also expects overall PGM production from SA to dip slightly this year.

“SA producers have made significant efforts to cut costs and reduce capex spending while maintaining output,” the company said in its annual report, published on Friday.

“However, rising costs and a low basket price mean that the mines at the top of the cost curve are loss making. If the basket price does not improve this year it may become necessary to close out some unprofitable areas.”

The PGM sector, the biggest employer in SA’s mining industry last year, has shed about 10,000 jobs as mining houses recalibrated operations in response to plunging prices.

SA, the world’s biggest platinum producer, has been bearing the brunt of the price slump over the past two years.

Anglo American Platinum last year cut 3,700 jobs to reduce costs by about R5bn, while Sibanye-Stillwater let go of 2,600 workers at its PGM operations in SA and Impala Platinum slashed its workforce by 4,000 workers.

Sibanye said it was positioning its PGM production profile to align with the longer-term market requirements, “while building up capability to service the requirements of the electrified vehicle market through participation in automotive battery value chains, particularly in Europe”.

The group is also working with partners to develop new applications for PGMs to offset an eventual decline in the autocatalyst market.

Still, the recent tapering in the growth of electric vehicle (EV) sales and a surge in demand for hybrid cars, which require catalytic converters to comply with emission standards, have given PGMs a new lease of life.

Sibanye said recycling of autocatalysts was expected to remain challenging this year.

“Persistent inflationary pressures, high interest rates and elevated new car prices are likely to encourage consumers to keep second-hand vehicles on the road for longer. As a result, recycling volumes are expected to see little improvement,” it said.

“Global light vehicle production is forecast to rise in 2025. However, the share of BEVs [battery electric vehicles] is expected to increase to 15.6% from 12.7% last year while production of ICE [internal combustion engine] and hybrid vehicles is predicted to decline. As a result, autocatalyst demand is expected to fall.”

PGMs have been a top revenue source for Sibanye under outgoing CEO Neal Froneman, who has been on an acquisition spree over the past decade, rarely losing out on clinching deals. In 2016 Sibanye bought Aquarius Platinum in SA, including the Mimosa joint venture with Impala Platinum in Zimbabwe.

That was followed by the acquisition of the Rustenburg operations from Anglo American Platinum.

In May 2017, Froneman splashed out $2.2bn on US-based Stillwater Mining Company — the largest transaction globally in the PGM sector in more than a decade.

The spending spree continued in 2019 with the purchase of Lonmin — a deal that comprised the Marikana PGM mining operations and associated processing, base metal and precious metal refining operations.

Sibanye said in its annual report that SA PGM acquisitions delivered a return of almost R140bn in core earnings over the years.

“Since 2016, the combined value generated by the SA PGM operations (measured as combined adjusted ebitda generated less total capex invested) is about R138bn, a material 6.5 times payback on investment over a seven-year period,” it said.

“After deducting the total acquisition cost for the SA PGM operations of R21.4bn the net return on investment from these acquisitions is R117bn.”

khumalok@businesslive.co.za