Sibanye Stillwater SA PGM operations deliver solid performance
The SA PGM operations delivered another solid performance, increasing production and generating positive free cashflow for H1 2024.
Lower production from the restructuring of loss-making shafts (two of which were closed and two restructured), as well as reduced production from Siphumelele shaft as a result of the shaft bin failure and at Kroondal due to the illegal industrial action, was more than offset by the consolidation of an additional 50% of Kroondal production following the acquisition of Anglo American Platinum Corporation Ltd’s (Anglo American Platinum) 50% shareholding in November 2023, resulted in a 4% production (excluding PoC) increase to 828,460 4Eoz, with AISC 9% higher year-on-year to R21,533/4Eoz (US$1,150/4Eoz) (excluding PoC cost).
A 28% decline in the average 4E PGM basket price however resulted in adjusted EBITDA declining by 60% to R4.8 billion (US$255 million). Free cash flow of R849 million (US$45 million) reflects a strong recovery from a negative adjusted free cash flow of R263 million (US$14 million) for H1 2023. Further cost benefits from restructuring in the SA region are expected to emerge in coming periods, further underpinning cash flow.
The restructuring (repositioned for lower production and cost) undertaken during Q4 2023 at the US PGM operations resulted in a significantly improved performance for H1 2024 compared with H1 2023. Mined 2E production was 16% higher than for H1 2023 and 7% higher than for H2 2023, with AISC declining by 23% year-on-year to US$1,343/2Eoz (R25,149/2Eoz), within guidance for 2024 and the best operational performance since H1
2021. PGM prices have remained under pressure during 2024 however, with the average 2E PGM basket price received for H1 2024, 30% lower year-on-year, resulting in adjusted EBITDA (excluding the US$43 million (R812 million) insurance claim related to the 2022 flood) of negative US$16 million (R306 million), compared with positive US$53 million (R976 million) for H1 2023.
Despite the positive production and cost outcomes, the 2E PGM basket price during 2024 has remained at levels some US$300 – 400/oz below the average AISC for H1 2024 and reducing unit cost to achieve profitability at current prices is not possible without increased capital investment in production growth.
The capital investment required is not feasible at current PGM prices and as a result, further restructuring of the US PGM operations is necessary to reduce cash outflows while ensuring the sustainability of the Columbus autocatalyst recycling operation.
The restructuring is likely to result in sustainable 2E production from the US PGM operations reducing by approximately 200,000 2Eoz (relative to 2024 guidance), with a consequent reduction in the workforce. A fundamental review of the mine operations to reduce AISC to approximately US$1,000/2Eoz will then follow. The measures taken have ensured that the Group is well positioned, not only to endure through this period of low commodity prices, but with improved optionality and leverage to a turn in the commodity price cycle, which will support ongoing value creation and strategic delivery.
