Sibanye incurs $2.58bn in impairments on lower metals prices

21st February 2024 By: Tasneem Bulbulia - Senior Contributing Editor Online

Sibanye incurs $2.58bn in impairments on lower metals prices

Sibanye CEO Neal Froneman

Multinational mining and metals processing group Sibanye-Stillwater has incurred impairments of $2.58-billion, or about R47.45-billion, for the 2023 financial year, on the back of the deterioration in metals prices and certain operational factors.

In a trading update ahead of the March 5 publication of its full results for the year, CEO Neal Froneman said 2023 was a challenging year as a result of a steep decline in the prices of most commodities the group produces, with the notable exception of gold.

Impairments were recognised at the US platinum group metal (PGM) operations; the South African gold operations; the Century zinc operation, in Australia; the Sandouville nickel refinery, in France; and the group's equity accounted investment in the Mimosa PGMs mine, in Zimbabwe.

Sibanye points out that the average rand-denominated platinum, palladium, rhodium and gold (4E) PGMs basket price had decreased by 32%, while the average dollar-denominated platinum and palladium (2E) PGMs basket price had decreased by 33%, resulting in a significant impact on the profitability and earnings of the South African and US PGM operations.

The group expects to report a loss a share for 2023 of between R12.68 ($0.69) and R14.01 ($0.76) compared with earnings per share (EPS) of R6.51 ($0.40) reported for 2022.

Further, headline earnings per share (HEPS) are likely to be between between 60c ($0.03) and 66c ($0.04) compared with HEPS of R6.52 ($0.40) for 2022.

This represents a year-on-year decline of over 100% and 90% to 91% in EPS and HEPS, respectively.

“We have already taken proactive steps to address loss-making production at unprofitable operations and the group remains focussed on ensuring the sustainability of our business and delivering on our strategical essentials through this period of low commodity prices,” Froneman has assured shareholders.

“Pleasingly all our South African operations and our Australian operation were profitable before the end of the fourth quarter of 2023. Despite delivering within 2023 production guidance, the US PGM operations and the Sandouville refinery will require further repositioning to address losses which are impacting group profitability and considering the depressed commodity price environment, have contributed to significant impairments being recognised," he adds.

In terms of output, Sibanye's South Africa PGM operations delivered another consistent operational performance for 2023 delivering 1.75-million ounces of 4E. This includes attributable production from Mimosa and the third-party purchase of concentrate within yearly guidance of 1.7-million to 1.8-million ounces.

The consolidation of 100% of production from the Kroondal operation from November 2023, following the early closure of the acquisition of Anglo American Platinum’s 50% share in the Kroondal pool and share agreement, added a further 20 900 oz to yearly production.

Production from the South Africa gold operations, excluding DRDGOLD, for 2023 of 646 680 oz was within revised guidance of 625 000 oz to 660 000 oz.

Despite the suspension of production from Kloof 4 shaft from July 2023 and the closure of Kloof 4 shaft during fourth quarter 2023, overall production was significantly improved compared with 2022, Sibanye points out.

Production from the US PGM underground operations steadily improved over the course of 2023, with mined 2E PGMs production of 427 272 oz – 1% higher than in 2022 and in line with the revised guidance of 420 000 oz to 430 000 oz.

Total PGM ounces of 310 314 oz of platinum, palladium and rhodium (3E) at the US PGM recycling operations were 48% lower year-on-year and below revised guidance of 350 000 oz to 400 000 oz of 3E owing to deliveries of used autocatalysts remaining depressed, mainly as a result of the uncertain global economic outlook, recessionary concerns and higher interest rates, which have inhibited consumer demand for new vehicles, resulting in light-duty vehicles remaining in service for longer periods before being scrapped, Sibanye points out.

Total nickel production from the Sandouville refinery of 7 125 t was also within guidance of 7 000 t to 7 500 t, with production rates having improved during the second half of the year.

Total nickel production included 1 411 t of nickel salts and 5 714 t of nickel metal.

In the Australia region, Sibanye acquired control of New Century Resources on February 22, 2023, enhancing the group’s exposure to global tailings retreatment and the circular economy.

Production from the Century zinc tailings operation was 76 000 t zinc of metal (payable) for 2023, with production having stabilised in the second half of the year after recovering from flooding in March 2023.