Mining Weekly

JOHANNESBURG (miningweekly.com) – Record quarterly earnings, record gold-mining safety and a sharply falling debt ratio were achieved by precious metals mining company Sibanye-Stillwater in the first three months of 2020.

In an operating update for the quarter ended March 31, the Johannesburg- and New York-listed company reported a strong start to the year, with the operating and financial performance for the first quarter of this year materially better than for the comparable period in 2019.

Its record breaking safety performance by the company’s South African gold operations came with a 66% gold production increase.

The record quarterly adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of R11 132-million ($724-million) were R10 324-million ($666-million) higher, which coincided with 40%-lower leverage and a net debt to Ebitda ratio falling to 0.75x from 1.25x at December 31.

The company, headed by CEO Neal Froneman, described as solid the performance from its platinum group metal (PGM) operations in South Africa, where the Marikana operation continued to be successfully integrated. PGM operations in the US were back at planned production rates, with output maintained during the Covid-19 pandemic.

South African operations were also ramping up as planned, following last month’s partial easing of Covid-19 restrictions.

First-quarter precious metals prices were buoyant, with palladium and rhodium reaching record levels, but Covid-19 concerns then led to a general collapse in most global markets, including precious metals markets.

In the US, the company’s two-element (2E) PGM basket price averaged a 57%-higher $2 053/2E oz than for the first quarter of 2019 and in South Africa, further rand depreciation provided an additional first-quarter revenue boost with the average 94%-higher year-on-year four-element (4E) PGM basket price of R33 192/4E oz.

The average first-quarter rand gold price received was a 35%-higher R795 323/kg with production at a 66% higher 238 076 oz.

Sibanye-Stillwater said in a release to Mining Weekly that it had optimised working capital and increased liquidity and balance sheet flexibility to ensure an appropriately robust financial position, with its primary financial priority remaining a lowering of the group’s net debt position still further.

The company stated that precious metals prices had recovered quickly in the second quarter, following the market collapse in late March 2020 after an initial liquidity sell-off. Basket prices remained elevated compared with the same time in 2019 with further depreciation of the rand continuing to benefit revenues for the South African operations.

The second-quarter 2E PGM basket price had averaged $1 820/2E oz to date, with the rand 4E PGM basket price averaging R33 950/4E oz and the rand gold price just over R1 000 000/kg to date, which if sustained, would be positive for earnings and cash flow as the operational build-up continued.

The future impact of Covid-19 remained uncertain and as such guidance would be provided once the company had greater certainty about the operating outlook.

Financial leverage fell below the targeted 1x in the first quarter, when liquidity was sufficient, despite the temporary Covid-19 suspension of production at South African operations.

Given reduced dollar net debt, available liquidity, including DRDGold, increased to R18 315-million ($1 026-million) at March 31, made up of R16 357-million ($916-million) worth of cash on hand, R214-million ($12-million) in committed undrawn facilities, and R1 744-million ($98-million) of available uncommitted overnight facilities.

Available revolving credit facilities in rands were drawn down ahead of the Covid-19 lockdown in South Africa as a precautionary measure.

The US PGM operations have continued to operate during the second quarter to date and the South African operations are rebuilding to an initial 50% capacity following amendments to the lockdown restrictions.

Capital expenditure for 2020 has been revised downwards by R840-million to R2 500-million, with 71% of the capital reduction related to ore reserve development, which was deferred while the operations were on care and maintenance, 10% on growth projects, notably Burnstone, and 19% on other capital projects.

FIRST QUARTER PRODUCTION

The US PGM operations reported an 8% increase in mined 2E PGM first-quarter production, reflecting the return to planned production rates at the East Boulder and Stillwater mines, despite the difficult ground conditions which continued to impact the Blitz project.

The 59% 4E PGM production increase in South Africa was driven by Marikana following the acquisition of Lonmin in June 2019.

The 66% increased in gold output reflected the return to normalised production as opposed to the first quarter of 2019, which was impacted by the five-month AMCU strike.

Of the 8%-higher 141 585 2E oz first-quarter output of the US PGM operations, the Stillwater mine, including Blitz, produced a 3%-higher 83 445 oz and East Boulder a 17%-higher 58 140 oz.

The first-quarter’s all-in sustaining cost (AISC) of US$894/2E oz was 7% higher.

The recycling operation fed a 9%-higher average of 28 t of catalyst a day. High recycling feed rates continued to increase with increased recycling receipts, as tonnes of catalyst received were 33 t/d per day, 60% higher than in the first quarter of last year.

The 418 072 4E oz produced in the 57%-higher first quarter by the South African PGM operations were at a higher AISC of R16 745/4E oz ($1 089/4E oz) year-on-year, reflecting the change to toll processing at Rustenburg, higher royalties and the inclusion of production from the Marikana operation with a higher average AISC.

The 4E PGM production from Rustenburg was 10% lower at 154 568 oz, owing to a Section 54 stoppage arising from the Thembelani fatal accident and Covid-19-related production losses. Higher AISC of R18 255/4E oz ($1 187/4E oz) was mainly as a result of lower production and higher royalties.

The 4E PGM production from Kroondal of 53 458 4E oz was 8% lower year-on-year, mainly owing to the lockdown during the last week of March 2020, impacting 4 649 4E oz. AISC of R12 619/4E oz ($820/4E oz) was 16% higher on lower production and higher royalties.

Marikana produced 171 997 4E oz, with the lockdown resulting in 14 650 4E oz of lost production for the quarter. AISC of R17 128/4E oz ($1 114/4E oz) was 2% lower than in the first quarter of 2019, demonstrating the cost benefits of synergies already realised.

First-quarter chrome revenue of R324-million was higher than last year’s corresponding period, despite the average chrome price declining by 23% from $167/t in the first quarter of 2019 to $128/t in the first quarter of this year.

Mimosa in Zimbabwe continued to perform steadily, reporting attributable 4E PGM production of 28 777 4E oz at an AISC of $826/4E oz.

ANGLO PLATINUM CONVERTER PLANT

As a result of the completion of repairs to the Anglo American Platinum (Amplats) converter plant from May 12, Sibanye-Stillwater said it would resume delivery of concentrate from the Rustenburg, Kroondal and Platinum Mile operations to Amplats for processing as per the original agreements.

The normal payment terms related to purchase of concentrate agreements and delivery terms of metals relating to tolling agreements would resume for all concentrates. In addition, Sibanye-Stillwater had agreed a delivery schedule with Amplats relating to tolled metals that should have been processed and delivered during the shutdown period. Delivery of these outstanding metal credits that were locked up as a result of the Anglo converter plant failure, were expected to commence this month with most of the outstanding metal credits expected to be delivered by the end of July.

Gold production AISC of R741 858/kg ($1 500/oz) also significantly improved compared with AISC of R914 590/kg ($2 030/oz) for the first quarter of 2019. The build-up to 50% is likely to be achieved during May.

SAFE GOLD PRODUCTION

Sibanye-Stillwater’s South African gold operations achieved an unprecedented 11.5-million fatality-free shifts on May 6, with more than 620 days without any fatalities. The total injury frequency rate recorded an overall 13% improvement.

The first-quarter total reportable injury frequency rate at the US PGM operations was 25% lower than for the comparable period in 2019.

The South African PGM operations experienced four fatalities during the quarter, compared with two fatalities for the same period in 2019.

Rowland mine winch operator Khulile Nashwa, 49, who was killed on February 7 when a locomotive derailed and struck him while travelling in the haulage, is survived by his wife and seven dependants.

Bambanani mine rock drill operator Joao Abilio Silindane, 56, who was fatally injured in a gravity-induced fall-of-ground incident at the Kroondal operation on January 17, is survived by his wife and two dependants.

Thembelani mine rock drill operator at Rustenburg operation Emanoel Kaphe, 48, who was fatally injured in a gravity-induced fall of ground incident at the Rustenburg operation on March 20, is survived by his wife and two dependants.

The fourth incident occurred on 24 March 2020. Siphumelele mine conveyor belt operator Rossofino Manhavele, 46, was found unresponsive lying in a prone position at the bottom of the stairway next to the reef conveyor belt tail pulley on surface at Rustenburg operation, succumbed to his injuries on March 30 whilst still in Millpark hospital in Johannesburg. He was 46 years of age and is survived by his wife and three dependants.

The board and management of Sibanye-Stillwater extended their condolences to the family and friends of these employees.

The company said that a principal focus at the operations continued to be on identifying and rectifying safety hazards and verifying that adequate close out had been achieved.

In addition, ongoing monitoring of outlying working places on risk score and compliance remained a key area of focus.

The critical control management journey, stemming from a detailed risk analysis process embarked on in the second half of 2019, was maintaining steady progress as was the overall organisational health and safety strategy.

The safe startup and subsequent production build-up, following the national Covid-19 lockdown, would be a critical focus during the second quarter, the company stated.