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Froneman confident PGM prices will rebound once temporary decline abates

Sibanye-Stillwater CEO Neal Froneman

Sibanye-Stillwater CEO Neal Froneman

10th May 2024

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Multinational mining and metals processing group Sibanye-Stillwater CEO Neal Froneman remains confident that the platinum group metals (PGM) price outlook is fundamentally positive and that the price gouging of late is merely a temporary phenomenon.

“Our view that the fundamental outlook for PGMs is positive is unchanged, with little evidence of a systemic change in the market fundamentals to justify the price collapse observed during 2023.

“We believe the drivers of this decline in PGM prices are temporary and caused by earlier supply chain disruptions owing to Covid-19 and the more recent invasion of the Ukraine, resulting in safety stocks being held in inventory,” he said upon the release of the group’s first quarter operating update on May 10.

Froneman noted that the destocking of inventory accumulated since 2020 seemed to have abated and that, while total vehicle production was forecast to increase, battery electric vehicle penetration rates had slowed amid a shift to hybrid vehicles.

“Primary supply is likely to continue to decline and secondary recycling supply remains depressed. These factors suggest a more supportive outlook for PGM prices, with a drop in interest rates the probable catalyst for a meaningful recovery in PGM prices,” Froneman stated.

He added that the fundamental outlook for gold remained constructive, with limited apparent downside for the gold price for the remainder of this year.

Froneman further insisted that Sibanye had sufficient liquidity and balance sheet flexibility with an improved financial performance expected in future, as the benefits of restructuring efforts flow through to the bottom line.

He said that, in particular, the closure of the acquisition of US-based metals recycler Reldan Group of Companies during the first quarter was also expected to contribute positively to earnings and cash flow.

“We are cognisant of our decreasing 12-month trailing adjusted earnings before interest, taxes, depreciation and amortisation, owing to lower PGM commodity prices, impacting negatively on our covenant ratios and therefore continue to focus on the balance sheet with a view to increasing liquidity through a number of non-debt instruments such as pre-pays and streams and proactively engaging our lenders on temporarily raising our lending covenants,” Froneman said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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