Sibanye-Stillwater (SSW) 3Q20 Production Results

Strong performance from SA operations and significant deleveraging

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Commentary

Sibanye had a strong third quarter, supported by a strong performance from the South African operations. It continues to show a strong cash profile in the current financial year and is reaping the benefits of elevated precious metal prices.

The R15.6bn in EBITDA beat market expectations of about R12bn. The third quarter production surprised on the upside due to a better than planned production build-up in the South African operations post the lockdown. The EBITDA contribution from the SA PGM business was R9.3bn which was well ahead of market expectations. The US PGM business was weaker when compared to the previous quarter, with QoQ (quarter-on-quarter) production falling by 5% lower. Productivity was also 8% lower due to the continued impact from COVID-19 restrictions.

A key positive was the continued deleveraging by the company. It decreased its Net Debt/EBITDA ratio to 0.3x from 0.6x recorded at June 2020. This was supported by R4.5bn in free cash flow. The short term focus was to deleverage to a target level of less than 1x, therefore this implies that the deleveraging programme is complete, and Sibanye is now well positioned to deliver quality returns to shareholders.

Sibanye-Stillwater remains our preferred precious metal mining company with a good PGM production split. It has a relatively better geographic diversification than other SA platinum miners, which gives it a competitive advantage. In this quarter,

the strong performance from the SA business was able to offset the weakness from the US operations. The company was also able to participate in the gold and PGM basket price rally this year and subsequently, managed to strengthen its balance sheet significantly. Given the rate at which deleveraging has taken place this year, it is likely that the balance sheet will be at a net cash position by December 2020.

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About the Author
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Lwando Ngwane

Equity Analyst, Sasfin Wealth

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