Sibanye swings into loss on PGM price meltdown, $2.6-billion in impairments

Diversified metals producer Sibanye released jarring results on Tuesday which showed it had fallen deep into the red in 2022 as the PGM price meltdown chowed its earnings and mangled the value of assets. 

It’s a dramatic shift from a couple of years ago when PGM producers were reaping record profits from record prices. The company’s rivals including Northam Platinum and Impala Platinum have also posted sharply lower earnings but have managed to stay in the black. 

But Sibanye bit the impairment bullet and shut off the dividend taps as it hunkers down for a turnaround in the PGM market, which has been hit by a perfect storm of global economic anxiety, premature obituaries of the internal combustion engine, and an unexpected decline in rhodium demand from Chinese makers of fibreglass. 

“The group’s financial results for the year ended 31 December 2023 (2023) were similarly impacted by the sudden and sharp decline in PGM and nickel prices. The 33% year-on-year decline in the average PGM basket prices in particular, resulted in a dramatic fall in the profitability of the US and SA PGM operations, which in recent years have contributed the bulk of Group earnings and cash flow,” the company said.

“The significant decline in metal prices and uncertain outlook, along with specific operational performance factors, also resulted in the group having to recognise impairments of R47.5-billion ($2.6-billion) against various assets, which was a primary driver of the group reporting a loss for 2023 of R37.4-billion ($2-billion) compared with a R19-billion ($1.2-billion) profit for 2022.”

The impairments were applied to the US PGM underground operation, SA Gold’s Kloof operation, the Burnstone gold project in South Africa, and the Sandouville nickel refinery in France. These are non-cash items and are an accounting write down of the value of the assets. 

But only 4 Shaft at the SA Gold Kloof operation is closing down as it is nearing the end of its life. 

The US PGM operation, known as Stillwater, has already returned plenty of cash to shareholders, and will do so again if and when the market rebounds from its current nosedive. 

“Stillwater has paid for itself and shareholders have benefited from dividends generated from the operation,” Sibanye CEO Neal Froneman told Daily Maverick in an interview.

Indeed, a couple of years ago Stillwater, located in the US state of Montana, accounted for half of the group’s Ebitda (earnings before interest, taxes, depreciation and amortisation).

And Sibanye maintains that the fundamentals of the PGM market point to an eventual rebound. 

“We continue to see emerging signals that ... support our long held, robust view on PGM demand,” the company. 

These include forecast production growth for the rest of this decade in light duty vehicles — or cars, simply put — powered by internal combustion engines that require platinum, palladium and rhodium for emissions-capping catalytic converters. 

Alongside this is a moderation in growth rates for battery electric vehicles which require other metals. Primary supply is also seen falling in the face of low prices. 

Sibanye has warned before of looming lay-offs in South Africa’s PGM sector, but the company did not announce any new planned retrenchments, known as “Section 189” notices. 

But Froneman told Daily Maverick that he wouldn’t “rule any out” in the future. DM