Stewart aims to keep it simple at Sibanye-Stillwater

SIBANYE-Stillwater shares are down almost 10% year to date, which is quite a disconnect considering its latest quarterly results, in which the platinum group metals (PGM) and gold miner produced R19.4bn worth of earnings – a 371% increase thanks to radically higher gold and PGM prices. But the miner is intent on making itself a wider play on recycling and lithium too. Miningmx sister publication Currency spoke to CEO Richard Stewart about its plans, as laid out in a recent capital markets day presentation.Your detractors see Sibanye as an extremely leveraged play on precious metals, with expensive-to-run-assets, so that when prices are high you print money and when prices drop, your earnings collapse. You mentioned “operational stability and consistency” a lot in the last quarterly results: is that where you, as the new CEO, want to take the company?There’s no doubt we’re very leveraged to prices but I don’t think we have to be with the assets we’ve got, and sometimes that perception of us is a little bit overdone, to be honest.If you took a snapshot of where we are – we stretched our balance sheet to do all the acquisitions we did in the past; we ended up with a big portfolio, possibly a little more complex than we needed. We’ve got some phenomenal assets with a really long life, but we haven’t really maximised the value we’ve got from the assets we currently have. Our South African PGM operations are a big part of that, we’ve got Keliber [the lithium project in Finland] ramping up, we’ve got the US PGMs we can get on the right footing, and gold’s a bit different because that’s in a different part of its lifecycle.We want to get the balance sheet healthier, because to create value as a mining company you do growth at down points in the cycle – especially if you’re going to do M&A. The only way to do both is maximise current value from your ops and that means cutting costs and maximising output – very simple. So operational stability is a key part of that. If we can get our ops running at the best point they should be running, we maximise the amount of money that will come, which will allow us to invest and cover our debt.Do you want to radically reduce debt? Now, surely, is the moment with the money you are making?One hundred percent. The promise we’ve made to the market – and this was on prices of six months ago – [was]: shareholders have been very patient with us over the years so if we make profits, they must get their portion, and that’s roughly a third.We do want to whack that debt, though our balance sheet is very strong on a net debt basis and where we’re earning, we’ve got no debt problems. Our net debt-to-ebitda [earnings before interest, tax, depreciation and amortisation] was 0.6 times at the end of last year, we’re very comfortable anywhere below one and at these prices it’s much lower.But the problem is our gross debt. Our previous objective was to keep net debt below one times; I’m saying halve the gross debt. That’s our target. So one third [of profits] will go to shareholders, one third to reducing the debt, one third to invest in the business. With prices where they are today, that debt [reduction] could happen in 18 months.Will it?If prices remain where they are, yes. That gives us flexibility moving forward, and that value all transfers to equity holders so shareholders benefit. We think it’s been one of the drags on our share price.Are you happy with the portfolio of assets you have, or do you want to sell some and buy others?The strategic priority for us was assets that are generating cash, and can deliver long-term value, and essentially we’ve got five: the South African PGM assets, the South African gold assets, the Stillwater operations, the recycling operations and Keliber.Keliber’s not generating cash, but we’ve spent all the capital now and it’s on the cusp. Everything else becomes a question of where we see the most value; the benefits of simplifying the portfolio beyond that is management time and capital.As soon as there’s a board decision on these we will make a decision, but some are obvious: we’ve got an equity stake in a copper project in Argentina and that would be an obvious one to exit. We’ve got a minority stake in a PGM project in Canada; we’re never going to mine it. We’ve got the nickel refinery in France and that turned to producing PCAM, a product for batteries, and that’s not where I see our strategy going. Do we sell it? Maybe we get a partner … but what we’re not going to do is invest our own cash in it going forward. Another good example is New Century in Australia – we’ve got 18 months left of zinc and we’ll mine that, but beyond that …So my message to the market has been: those are our core five, the balance is how do we maximise value through sales, partnerships and closures.On the US PGM operations, it seemed like a genius move when palladium prices spiked and a terrible purchase when they crashed back. Production volumes are pretty low, and your costs surged. They’ve since come back, but your price target is to mine at $1,000/oz, from an all-in sustaining cost of $1,291/oz now. How are you going to do that?When we bought Stillwater it was when the palladium price went mad and Stillwater paid for itself in four years. When we bought it, it was doing about 550,000 ounces (a year) and it consisted of two mines: Stillwater West and East Boulder.We then committed to building a whole new mine called Stillwater East and that was going to be 300,000 oz and take the big picture to 850,000 oz a year. In doing that we brought all the costs and services and infrastructure on to support an 800,000 oz operation, so costs went up but we weren’t hitting the numbers. And when we saw the outlook for prices were questionable, we pulled it back.Stillwater West was the oldest and by far most expensive operation, so the first thing we did at the end of 2024 was put it on care and maintenance. That dropped the production to what you see today. That took out a whole lot of lossmaking ounces; now we’ve just got the two mines.Now, why’s Stillwater important to us? It’s got a 40-year official life of mine but an orebody that will last 100. And it’s also the only PGM producer outside of South Africa, Russia and Zimbabwe. Now, that is important for North America.We don’t think that palladium will drop sustainably below $1,000 in the future – so if we can get our cost base down there then we have an operation that can survive the worst, and during the best we can make good money.How do we get there? Your biggest cost in the US is people; so what we need to do is maximise production per person and we are increasing the amount of mechanised mining we do. Very simply, we will mine more rock per person; about 60% more rock for 40% more metal, and the net result is a 20% lower cost. That’s how the sums work and it will take us two years to implement.What about Keliber, your big lithium play in Finland, that is costing about R15bn to build?What we see is that, for the next two or three years, the lithium market is probably in balance, and those markets today are still dominated by China. Beyond that, we see the market going into deficit.I would assume that by 2030 you’ve got to bring a whole bunch of new projects online to keep the market even close to being in balance, and that requires prices well in excess of $30,000/t compared to today, where we’re sitting in the low $20,000s. That assumes all the supply can come online, and this is our point with Europe; the projects are there and when we started five years ago there were five with us and they are still in feasibility stage because they can’t get permits.So, at Keliber we’re sitting with a mine-to-market project that has a mine, a concentrator and a refinery. Now, 70% of lithium refining capacity is in China and [Keliber] is the only one that will be operating in Europe – and one of the only ones in the world that’s mine to market this close together.So, why’s it important? First, what the world is realising with all the disruption in supply chains is that they have to diversify sourcing material [away from China]. And in the US, they’ve definitely moved a lot faster than the EU and recognised that if they want to secure their own critical minerals and become less dependent on China they have to do two things: ensure that capital markets in the West are competitive with the East, and incentivise new supply. In my mind, Keliber is one of the most strategic lithium projects in the world.Do you think the market just doesn’t rate it?We’ve just built it so we need to prove it works, so that’s up to us. I think there’s still a question mark over the lithium market, which was smashed so badly in the past two years and people are trying to understand where it’s going to go. And then I think people are questioning Europe and what they’re going to do with critical metals. Some of it’s in our court, some is not, so I can’t blame the market.Lastly – your gold mines, which is how Sibanye began. Are they still key to the business?Our thinking is manage the current mines as best we can for margin and start investing in our shallower business and we see that transition over the next four, five years.This article first appeared in Currency, a Miningmx sister publication in the Financial Mail Group.The post Stewart aims to keep it simple at Sibanye-Stillwater appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com