Sibanye-Stillwater suffers $2.58bn in asset impairments

SHARES in Sibanye-Stillwater fell under renewed pressure after the group…

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SHARES in Sibanye-Stillwater fell under renewed pressure after the group said in a trading statement on Wednesday that the carrying value of assets had fallen by $2.58bn (R47.5bn) for the 12 months ended December.

The stock was about 4% down in Johannesburg. If the response was muted it may because the impairments were below market consensus, said James Wellsted, spokesperson for Sibanye-Stillwater. Shares in the company are about 48% lower on a 52-week basis.

The impairments are predominantly owing to steep declines in average prices for platinum group metals (PGMs) which most heavily impacted Sibanye-Stillwater’s US mine, Stillwater. Plans to expand the mine’s production have been consequently shelved, hitting its value.

The impairments are recognised at the basic earnings level. Sibanye-Stillwater said today full year earnings, due to be published on March 5, would be a negative R12,68 to R14,01 per share. This compares to basic earnings of 651 cents/share in 2022.

At the headline level, earnings would be between 60 and 66 cents per share compared to 652c/share in 2022.  This reflects operational losses within the business which the group said would see restructuring at its nickel refinery in France as well as at Stillwater. Details of restructuring at the firm’s loss-making PGM operations was also expected when Sibanye-Stillwater announces its full year numbers in March.

Neal Froneman, CEO of Sibanye-Stillwater told Miningmx earlier this month that up to 60,000 ounces of annual PGM production would be cut while Stillwater’s proposed expansion to 700,000 oz of palladium and platinum by 2027 would be postponed. But the mine would not be shut.

It’s possible the group will shut Sandouville, the nickel refinery.

Given that Sibanye-Stillwater’s dividend is paid from earnings, the group will naturally not make a payout. It first passed the dividend in 2017 shortly after buying Stillwater for $2.2bn. Wellsted said the group had repaid the investment in Stillwater since then.

Commenting in the trading statement Froneman said today 2023 had been “challenging” as commodity prices had fallen, except in gold. Nonetheless, the closure of shafts at the firm’s Kloof shaft, announced last year, fed into the impairment test.

“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 said.

“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.”

Production from Sibanye-Stillwater’s South African PGM mines of 1.75 million ounces met annual guidance (1.7 to 1.8m oz) while gold production of 646,680 oz was within revised guidance (625,000 to 660,000 oz).

Stillwater production was 427,272 oz in palladium and platinum. The 40% decline in the palladium price last year exerted enormous pressure on the mine. Pressure, too, fell on the group’s recycling operations with 48% less production at some 310,314 oz – a decline that missed downward revised guidance. Froneman said consumers were hanging on to cars for longer, partly owing to high interest rates and uncertain macroeconomics.

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