Johannesburg – The start to the year has been extremely positive, with the operational momentum from Q4 2020 (following normalisation of the operations post COVID-19 disruptions), carrying through into 2021.
Despite ongoing adherence to COVID-19 protocols – with the South African (SA) operations in particular having to manage the health and safety challenges associated with the second wave of COVID-19 infections which affected the country in January 2021 – the SA gold, SA PGM and US PGM segments, all reported higher production year-on-year.
This positive operational performance underpinned a record quarterly financial performance, with Group adjusted EBITDA of R19,826 million (US$1,325 million) for Q1 2021 78% higher than adjusted EBITDA for Q1 2020 of R11,132 million (US$724 million), which was then a record quarter for the Group.
The SA PGM operations in particular benefited from a strong operational performance and sharply higher PGM prices, delivering a 90% increase in adjusted EBITDA to R15,280 million (US$1,021 million) from R8,043 million (US$523 million) for Q1 2020.
Notably, adjusted EBITDA generated by the SA PGM operations for this quarter, is higher than the total acquisition costs of these operations, emphasising the significant return on investment already delivered and the future windfalls stakeholders can continue to expect. With the 4E PGM basket having increased further during Q2 2021, the outlook for the year is very promising.
Precious metals prices remained strong during Q1 2021, with palladium and rhodium prices again reaching record levels, supported by ongoing supply disruptions and strong physical demand. For the US PGM operations, the 2E PGM basket price averaged US$2,128/2Eoz for Q1 2021, 4% higher than for Q1 2020, with the 4E PGM basket for the SA PGM operations 59% higher year-on-year at R52,722/4Eoz (US$3,524/4Eoz) and the average rand gold price, 8% higher at R857,126/kg (US$1,782/oz).
PGM prices have risen further in Q2 2021 to date, with the gold price remaining firm. PGM markets remain tight with the fundamental outlook for these metals positive. In the medium term, the roll out of COVID-19 vaccines across the globe continues and stimulus measures drive global economic recovery. Longer term PGMs and green metals are expected to continue to play a critical role as global sentiment shifts towards a more environmentally conscious future.
As a consequence of Sibanye Stillwater rapid growth in the PGM industry along with the significant outperformance of PGM prices relative to most commodities in recent years, the PGM operations’ contribution to the Group’s financial performance is predominant.
Sibanye Stillwater therefore continues to seek more balance in its portfolio by advancing its green metals strategy, with its first investment into the Keliber lithium project in Finland in March 2021, and through its stated intent to grow its gold portfolio internationally.
Re-balancing its investment portfolio should ensure greater earnings consistency through the cycle and create a larger, more stable investment proposition, which will be relevant to a broader and deeper pool of investors.
CEO Sibanye Stillwater Neal Froneman says “It has been pleasing to see the Group successfully deliver on its vision to create superior value for all stakeholders since its inception in 2013. For shareholders specifically, exceptional value has been created both through the over 500% appreciation in the share price (20 fold increase in market capitalisation from approximately R10 billion (US$1.2 billion) on listing, to approximately R200 billion (US$15 billion) and also through the approximately R15 billion (US$1 billion) in dividends returned to shareholders over the last eight years.”
“At the same time, we have been able to invest significantly in the sustainability of our operations – in SA, recently announcing investment of approximately R6.3 billion in projects at both our PGM and gold segments and in the US continuing to invest in growth at Blitz (Stillwater East). These investments will secure employment and deliver significant economic value to all stakeholders over the long term.”
OPERATING GUIDANCE FOR 2021
The 2021 annual guidance provided to the market in February 2021 remains unchanged except for the SA PGM project capital for the year. Mined 2E PGM production from the US PGM operations for 2021 is forecast to be between 660,000 2Eoz and 680,000 2Eoz, with AISC of between US$840/2Eoz to US$860/2Eoz. Capital expenditure is forecast to be between US$300 million and US$320 million, approximately 60% of which is growth capital in nature.
4E PGM production from the SA PGM operations for 2021 is forecast to be between 1,750,000 4Eoz and 1,850,000 4Eoz with AISC between R18,500/4Eoz and R19,500/4Eoz (US$1,230/4Eoz and US$1,295/4Eoz).
Capital expenditure is forecast at R 3,800 million (US$253 million) with levels for 2021 elevated due to carry-over of approximately R800 million (US$53 million) of capital from 2020 which was unspent due to the COVID-19 disruptions. In addition, R408 million (US$27 million) of project capital expenditure is expected to be spend in terms of the K4 and Klipfontein projects for the year.
Gold production from the SA gold operations for 2021 (excluding DRDGOLD) is forecast at between 27,500kg (884,000oz) and 29,500kg (948,000oz) with AISC between R760,000/kg and R815,000/kg (US$1,576/oz and US$1,690/oz).
Capital expenditure is forecast at R4,025 million (US$268 million), including carry-over of approximately R400 million (US$27 million) from 2020 which was unspent due to the COVID-19 disruptions. R425 million (US$28 million) of project capital expenditure has been provided for.
The dollar costs are based on an average exchange rate of R15.00/US$.