JOHANNESBURG (miningweekly.com) – The benefits of Sibanye-Stillwater’s commodity and geographical diversification during the last two years are clearly evident as the South African mining industry is negatively impacted on by a strong rand, the multicommodity miner said on Thursday.

This can be seen in the solid operating performance by the company’s South African and US platinum-group metals (PGM) operations, which offset a challenging quarter (ended March 31) for its South African gold operations, which were affected by a lower average rand gold price and several safety-related stoppages and operational disruptions.

Despite the impact of the strong rand on revenues from the miner’s South African operations, the group’s adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) for the March quarter increased by 30% year-on-year to R1.58-billion.

The group’s PGM operations, which benefitted from higher palladium and rhodium prices, delivered 76% of the group’s adjusted Ebitda.

Following another good operating performance, the miner’s US PGM operations reported an adjusted Ebitda of R942-million, which was 9% higher in dollar terms than the December 2017 quarter and accounted for about 60% of the group’s adjusted Ebitda.

Adjusted Ebitda from the South African PGM operations, at R258-million for the quarter, increased by 18% relative to the comparable quarter in 2017. Further cost reductions and a 4% higher average platinum, palladium, rhodium and gold (4E) PGM rand basket price resulted in the adjusted Ebitda margin increasing from 7% in the March 2017 quarter to 9% in the quarter under review.

The South African gold operations, however, were affected by a poor safety performance, which, together with a 2% decline in the average rand gold price received, resulted in adjusted Ebitda declining from R991-million in the March 2017 quarter, to R374-million in the quarter under review.

Due largely to the inclusion of the US PGM operations, net debt was 8% lower than at December 31.

Sibanye-Stillwater is considering a number of financial initiatives, including streaming agreements and recycled inventory pipeline financing, to reduce gearing levels, should it make commercial sense.

Further, the recent refinancing of the Revolving Credit Facility (RCF), which was upsized from $350-million to $600-million on improved terms, reflects the confidence that lenders have in Sibanye-Stillwater’s strategy and financial outlook, the miner stated on Thursday.

Utilised shorter-term RCFs now constitute only 30% of net debt, which, along with the strong support shown by lenders, highlights the improved group liquidity position and financing flexibility going forward.

OPERATING REVIEW

Attributable 4E PGM production from the South African operations of 286 194 oz of 4E for the March quarter was flat compared with the 286 716 oz of 4E produced in the comparable period in 2017.

Operating cost benefits derived from cost and operational synergies realised in 2017 resulted in an 8% reduction in underground operating costs for the South African PGM operations to R11 032/oz of 4E.

All-in sustaining costs (AISC) for the South African PGM operations were 4% lower at R10 186/oz of 4E, owing to ongoing benefits from cost and operational synergies realised last year.

Chrome production for the March quarter was about 194 000 t, with realised metallurgical chrome prices having decreased to $223/t.

Owing to the impact of the rand on cash flow in the March quarter, the miner took the decision to defer all nonessential capital expenditure, including about R300-million associated with the construction of a dense media separator and the Rustenburg chrome plant.

Production from South African gold operations decreased to 291 500 oz, compared with the 330 100 oz produced in the first quarter of 2017 and the 342 200 oz produced in the fourth quarter of 2017.

Adjusted Ebitda for the March 2018 quarter of R374-million was 62% lower than for the comparable period in 2017, with the South African gold operations having contributed 24% to the group adjusted Ebitda during the quarter.

Sibanye-Stillwater’s US PGM operations, meanwhile, maintained their strong operating performance, with underground platinum and palladium (2E) PGM production of 149 549 oz, compared with the 147 046 oz produced in the fourth quarter of 2017.

Production from the Stillwater mine, including the Blitz expansion project, which is anticipated to add 300 000 oz/y of 2E output by 2022, contributed about 62% of total 2E PGM production.

While the US and South African PGM operations are expected to maintain the strong operational performance reported in the quarter under review, the miner stated that the outlook for the full-year remains positive, with operating results from the South African gold operations expected to improve.

Production guidance for the South African gold operations for 2018 is currently unchanged, with lost production in the March 2018 quarter expected to be recovered during the course of the year.

Full-year gold output is forecast at between 1.24-million and 1.29-million ounces at an AISC of between $1 130/oz and $1 180/oz.

The South African PGM operations are expected to produce between 1.1-million and 1.15-million ounces of 4E at an AISC of between $825/oz and $860/oz, while the US PGM operations are expected to produce between 580 000 oz and 610 000 oz of 2E at an AISC of between $640/oz and $680/oz.