Gold gives Sibanye-Stillwater much-needed Ebitda boost
Tue Nov 05 2024
THE surge in the gold price supplied Sibanye-Stillwater with a much-needed lift for the third quarter helping to boost adjusted Ebitda 9% to R3.3bn year-on-year amid tightening margins for the group’s platinum group metal (PGM) assets.
The average gold price received of $2,470 per ounce, an increase of 24% higher, resulted in a three-fold increase in the gold division’s contribution to Ebitda (R1.35bn).
Sibanye-Stillwater CEO Neal Froneman said the gold mines “are expected to generate substantial cashflow” in the current quarter given the price of the metal has continued to improve. It was trading at $2.734/oz at the time of writing.
Banks are forecasting a gold price of $2,800 per ounce before the end of the year, possibly increasing to $3,000 to $3,100/oz during 2025, largely driven by a rate cut cycle, sustained central bank interest in the metal and geopolitical distress. The metal was hit more than 30 new records this year and at its current price is 33% higher year-to-date.
The value of global gold demand passed $100bn for the first time in the third quarter as investors flocked to the metal, said the Financial Times last week citing a report by the World Gold Council.
The group announced, however, the Sandouville facility in France would stop nickel and salts production during the first half of the 2025 financial year following a precipitous fall in the nickel price. A feasibility study of whether Sandouville can be repurposed to produce pCAM, a precursor metal, (the GalliCam project) was expected in the first quarter.
Full year production guidance from Century, the group’s zinc re-mining asset in Australia has been downgraded to 79,000 to 88,000 tons from 87,000 to 100,000 tons previously. Sibanye-Stillwater announced a bushfire in Queensland during October which damaged surface piping infrastructure at the mine.
Guidance on Sibanye-Stillwater’s other operations was unchanged.
But the main concern at Sibanye-Stillwater remains its PGM operations. It announced significant restructuring of its US PGM operations (Stillwater), cutting production to about 200,000 oz a year for 2025 – a development that helped boost the palladium price, Froneman said.
While the US mines improved their production and cost expectations in the third quarter, the 2E PGM basket price was “well below” all-in sustaining costs $1,274/2Eoz. The assets have continued to incur financial losses (a $6m adjusted loss), Froneman said.
“This has necessitated further restructuring of the US PGM operations to reduce fixed costs and to secure the sustainability of these Tier 1 strategic assets,” he said.
There was also increased margin pressure at the South African PGM mines where third quarter adjusted Ebitda of R1.58bn ($88m) was 37% lower year-on-year owing to an inflation-related increase in AISC and a 2% decline in the metal basket price. Despite this the outlook is much better as anticipated production increases and cost improvements “should result in an improved Ebitda contribution” in the current quarter.
There have been signs of life for PGM prices in the last three months will the palladium price 29.7% higher over the period.
Investment demand for palladium increased during October with ETF demand rising 39% to 715,000 oz year-to-date. NYMEX short positions also reduced, largely owing to the cut in Sibanye-Stillwater’s proposed production in 2025.
But the planned downsizing was “insufficient to re-balance the market,” said Adrian Hammond, an analyst for Standard Bank in a recent report. “The price reaction wasn’t as pronounced as we expected suggesting palladium is still in a large surplus,” he said.
Source: https://www.miningmx.com/