Sibanye-Stillwater’s results for the six months and year ended 31 December 2020 were impressive and broke several records.
Attributable profit of R29.312 million for 2020 was 47 times higher than R62 million for 2019 to R29.312 million. Free cash flow (FCF) was significantly higher for 2020, despite the impact of Covid-19 on the operations, with FCF of R19.914 million – 63 times higher than FCF for 2019 of R318 million. “These are excellent results which demonstrate the benefits of the Group’s larger, diversified production base,” commented Neal Froneman, Sibanye-Stillwater CEO.
As a result of this strong performance and the improved outlook for the Group, the Board declared a year-end dividend which delivers a full year dividend to shareholders at the top end of the Group policy range. The full year dividends of R10.713 million is equivalent to an approximate dividend yield of 8.7% average share price for 2020, well ahead of most peers. Adjusting for the 50 cent per share interim dividend results in a final dividend for 2020 of approximately R9.375 million or 321 cents per share.
“The manner in which the Group was able to navigate its way through the challenges posed by Covid-19, emerging with a very robust balance sheet and having provided good substantial financial and social support to its employees, local communities, government, shareholders and all stakeholders is a significant achievement given the backdrop of 2020,” Froneman said.
The operational performance was pleasing, with the South African (SA) operations recovering strongly from the Covid-19 lockdown in Q2 2020, reaching normalised production levels by November 2020. The SA PGM operations produced 1 576 507 4Eoz, exceeding the upper limit of revised annual guidance of between 1 350 000 4Eoz and 1 450 000 4Eoz by 9%, with PGM production of 918 679 4Eoz for H2 2020, 40% higher than for H1 2020. The SA PGM production base has grown significantly with the inclusion of the Marikana operations from June 2019, and is significantly cash generative, with FCF of R11.746 million close to equalling the acquisition cost of the assets that now comprise the SA PGM operations.
Mined PGM production from the US PGM operations of 603 067 2Eoz in 2020 was marginally higher year-on-year, but below revised guidance of between 620 000 and 650 000 2Eoz, primarily due to the impact of a spike in Covid-19 infections at the US PGM operations in Q4 2020, associated with a severe wave of Covid-19 infections in Montana. Despite the Covid-19 disruptions, H2 2020 production of 305 327 2Eoz was 3% higher than for H1 2020, with most operating trends improving towards the end of the year. The US PGM operations reported FCF of US$169 million (R2.780 million)
Production from the SA Gold operations (excluding DRDGOLD) of 25 190kg (809 877oz) was 3% above revised guidance of between 23 500 and 24,500kg (756 000oz and 788 000oz), with production of 15 023kg (483 001oz) for H2 2020, 48% higher than for H1 2020. The SA gold operations have now stabilised after the significant disruptions experienced in 20118 and 2019 and have made a strong return to profitability, generating FCF of R6.348 million.
Debt reduction and future investments
The Group deleveraging strategy was successfully achieved during the year, with borrowings reducing by R5.354 million to R18.383 million and cash and cash equivalents increasing to R20.240 million. On a trailing 12-month basis, adjusted EBITDA increased by 230% to R49.385 million resulting in a net cash: adjusted EBITDA ratio of 0.06x compared to net debt: adjusted EBITDA of 1.25x at the end of 2019. The strategic focus has now shifted from deleveraging to appropriate allocation of capital to ensure ongoing value for all stakeholders and the sustainability of the Group.
On 16 February 2021, the Board approved the development of the K4 and Klipfontein projects at the SA PGM operations and the resumption of capital development and equipping at the Burnstone gold project. This represents a significant capital investment of approximately R6.8 billion in high return organic projects in South Africa. The projects have a combined NPV of R5.1 billion at conservative project prices assumed for the evaluations, which increases significantly to R26.9 billion at current spot prices. In addition to this value add for investors in Sibanye Stillwater, the ancillary benefits for communities and other stakeholders will be significant. Approximately 7 000 jobs will be created and sustained over the life of the projects, with significant financial benefits likely to accrue to local communities and regional and national government
From a social perspective, assisting stakeholders to manage the Covid-19 pandemic was a primary focus during 2020 and will continue to be in 2021. Board approval has already been granted to commit up to R200 million in direct and indirect funding/assistance to the vaccine roll out effort, subject to certain conditions, and Sibanye-Stillwater stands ready to assist Government with the logistics of the vaccine roll out throughout the country. Significant Company resources are available to assist should it be required including our 44 healthcare facilities and qualified healthcare professionals spread throughout the regions in which we operate.
Froneman added that a tailwind of strong commodities and increased production for 2021 put the Group in a good position for a stronger performance in 2021. “The global focus has shifted to prioritising a cleaner and greener future, Sibanye-Stillwater is particularly well placed in pursuing its growth strategy and producing the essential metals that the world requires,” he concluded.