Sibanye expects to swing into a loss

Sibanye-Stillwater expects to post a loss for the first half of its 2024 financial year as lower platinum prices begin to bite and operational challenges at its South African mines affect production. 

The company released a trading statement and production update for the six months to the end of June 2024 on Monday, giving investors a glimpse at the company’s challenges. 

Sibanye said it expects to report a loss per share for H1 2024 of between 250.8 South African cents and 277.2 cents compared with earnings per share (EPS) in the same period last year of 262 cents. 

This is more than a 100% decline year-on-year and mainly reflects the R7.5 billion impairment taken at its US-based platinum operations. 

This impairment was taken due to lower medium- to long-term forecasted prices for palladium mined in the US, resulting in a decrease in expected future earnings. 

However, headline earnings per share (HEPS) are expected to be positive, between 4.6 cents and 5 cents for the first half of 2024. 

This is a sharp decline of 97% from HEPS of 208 cents per share for the first half of 2023, and this metric also excluded the above impairment of its US assets. 

The company said the decline in EPS and HEPS is primarily due to –

• A significant decline in commodity prices, specifically platinum group metal (PGM) prices, resulted in a 28% lower average rand PGM basket price and a 30% lower average US dollar PGM basket price year-on-year, significantly reducing revenue. This revenue impact was partly offset by an 18% increase in the average rand gold price. 

• A 5% to 8% reduction in medium- and long-term palladium price forecasts. This is used for fair value calculation purposes and led to a further impairment of the US PGM operations.

• Lower production and higher unit costs from the SA gold operations following the cessation of production from the Kloof 4 shaft during H2 2023. Several small earthquakes restricted access to planned high-grade production areas at the Kloof and Driefontein operations. Residual closure costs and restructuring at the SA gold operations and SA regional services during H1 2024 also affected earnings. 

• Lower production from the SA PGM operations. This was due to damage to surface infrastructure at the Siphumelele shaft, Rustenburg operation, which affected production from this shaft for two months, with the subsequent production buildup ongoing. 

Sibanye noted improved performance at its South African platinum operations towards the end of the period, resulting in higher production compared to the first half of 2023.

However, these operations are still plagued by challenges such as the failure of the Siphumelele shaft bin and unprotected strike action at the Kroondal operation. 

Encouragingly, the performance of the company’s US platinum operations improved. The first half of 2024 was the best production half-year result since the end of 2021. 

Output improved from these operations, but the company said it will consider further actions to address the cost of its US PGM operations as lower platinum and palladium prices remain a significant challenge. 

Gold production in South Africa plunged by 21% due to the closure of the Kloof 4 shaft and increased seismic activity, restricting access in its Kloof and Driefontein operations.