Sibanye-Stillwater reported yesterday that it haD cut the 2023 production guidance of gold, nickel and platinum group metals (PGMs), citing lower metal prices, operational mishaps, and a strike in France.
In its results for the six months ended June 30, 2023, the group said the updated gold production guidance of 625000 to 660 000 ounces was 16% to 17% lower than forecast at the beginning of the year following a shaft incident at Kloof 4 shaft earlier this month.
Guided nickel output was lowered to 7000 and 7500 tons, while PGM output from the firm’s US recycling operations was dropped by 100000 ounces to 350000 to 400000 ounces for the year, as a result of lower demand.
The group also reported a profit for the period (after tax) of R7.8 billion for the first half of 2023 was 37% lower than the first half of 2022, with basic earnings per share (EPS) and headline earnings per share (Heps) of 262 SA cents and 208 SA cents, approximately 38% and 51% lower year-on-year, respectively.
Despite this, the group declared an interim dividend of 53 SA cents, last year, it was 138 cents.
Sibanye CEO Neal Froneman said the group's financial and operating results for the reported period reflected the challenging global macro-economic and turbulent geopolitical environment that has prevailed during 2023, with slowing global growth reducing demand for commodities, resulting in a significant decline in commodity prices other than gold during the period.
“The operating environment has been equally demanding, with regional factors in our operating jurisdictions posing significant challenges. These regional factors include some which we have previously highlighted as ‘grey elephants’ (highly probable, high impact yet often ignored global trends), such as climate change - causing extreme weather events that are becoming increasingly frequent globally, with severe storms disrupting our US PGM operations in mid-2022 and our New Century tailings operations in Australia in the first quarter of 2023.
“Social discontent - widespread strikes in France causing downtime at our Sandouville nickel refinery in Le Havre during the first half of 2023 and ongoing community and labour-related disruptions common in South Africa. Moreover, the shortage of critical skills impacting the mining industry globally, continues to impact productivity and costs at our US PGM operation, and electricity disruptions and crime (cable theft and illegal mining) have intensified in South Africa,” he said.
“The impacts of the precipitous decline in PGM prices and operational disruptions at our US and European regions, were cushioned by a significantly improved financial contribution from the SA gold operations,” Froneman said.
He said the SA PGM operations delivered another solid, consistent operating result for first half of 2023, commendably managing the impact of elevated Eskom load curtailment and making significant progress in addressing cable theft during the second quarter of 2023.
Production from the SA-managed gold operations (excluding DRDGold) for the first half 2023 of 10411kg increased by 233% year-on-year, with All-In- Sustaining-Cost of R1113,391 per kg 47% lower, mainly reflecting the recovery in production from the SA gold operations following the suspension of operations as a result of the industrial action and consequent lockout during the first half of 2022.
Looking ahead, Froneman said while the global macro-economic outlook remained uncertain, central bank rate hiking cycles in many economies appeared to have reached or are nearing their peaks, and there are positive signs that a recession might be avoided, although low growth conditions are expected to continue well into 2024.
“Global auto sales appear to be recovering, with recent forecasts for 2023 consistently being revised upwards. While this has yet to translate into a tangible increase in demand for PGMs or a recovery in recycling volumes, an implied improvement in PGM demand during H2 2023 would be supportive for spot PGM prices as destocking subsides,” he said.
Anchor Capital investment analyst Seleho Tsatsi said lower PGM prices and production volume challenges drove earnings 51% lower. Sibanye-Stillwater has announced significant downgrades to its 2023 financial year guidance today.
“The cut in forecast production is consequently leading to higher unit costs in certain parts of the business. Margins in the SA PGM business (the group’s largest profit contributor) are getting closer to trough levels. The PGM basket price (and therefore earnings) continue to be under meaningful pressure,” he said.
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