Mind the gap: Sibanye-Stillwater plans new era

SIBANYE-Stillwater’s founding CEO, Neal Froneman, was an expert at reinventing mines. In 2013, he bought Gold Fields’s faltering mines and turned them into cash machines. Three years later, he embarked on a series of big-money mergers & acquisitions in platinum group metals (PGMs), adding more than 1-million ounces in annual production. It was a masterstroke because just as Sibanye-Stillwater was bedding down its deals, prices for PGMs started to soar.The task of reinvention now falls to his successor, Richard Stewart, who last month unveiled a new strategy. Dealmaking, while acknowledged as part of the group’s DNA, was now on the backburner. “We have no acquisition strategy,” Stewart said when analysts asked ‘where to next?’ for Sibanye-Stillwater.Instead, growth capital will be allocated to organic projects. As part of an inward-looking approach, Stewart aims to slash costs by R3bn and add 2.5% to precious metal revenue a year through centralising services and implementing mining efficiencies. “Spoiler alert: this is a boring, back-to-basics approach,” Stewart told the analysts at his presentation.The market won’t mind boring if Sibanye-Stillwater can tackle some deficiencies of its recent past, such as missed production guidance, especially at its Joburg gold mines Driefontein and Kloof. After more than 50 years in operation, the mines are deep and vulnerable to seismic events. Seismicity at Kloof last year resulted in the permanent closure of a shaft. The result was a drop in production and a potential reduction in resources and mine life.The maturity of Driefontein and Kloof, and Beatrix, a smaller mine in the Free State, raises the critical question of how long Sibanye-Stillwater can continue to mine gold, assuming the high price of the metal is not sustainable. Interestingly, the group’s approach to the future of gold production is conservative. Surprising, perhaps, for Sibanye-Stillwater, until you see its gold reserve price of $1,750/oz. Set in 2024, it now looks too low, but Stewart indicated at his strategy presentation that there might not be a radical adjustment, the current gold price notwithstanding. When it does disclose a new reserve price, it will reflect “through-the-cycle” thinking.Says Stewart: “Resource optimisation is possibly the one area where I see a lot of opportunity for us that we haven’t necessarily [pursued] in the past. Sibanye-Stillwater has had less than a 25% conversion from resources to reserves. We haven’t spent a lot of time strategically looking at these assets to say: ‘How can we optimally extract them?'”As a result, big spending is unlikely on new gold projects, other than the possible reopening of Burnstone, which is still to pass a feasibility study. When this 140,000oz-a-year gold project in Mpumalanga was abandoned, total capex was set at R5.5bn, of which a significant portion has already been spent.“We don’t see any big projects within those [gold] operations where we’d be investing significant growth-type capital,” says Stewart. Currently, the gold mines are set up to continue until 2035. (It’s worth pointing out that when Froneman took over the mines from Gold Fields, they had a decade of mining left.)“We see that capital going somewhere else and being better spent,” says Stewart. That can only mean the PGM mines in South Africa, where economic reserves are more bountiful, and there’s huge opportunity to extend and even grow production by dropping boundaries between adjacent mines.Stewart reckons that with R4.4bn in near-term outlay, Sibanye-Stillwater could sustain 1-million ounces in annual PGM production in 2040. A further 400,000oz in as yet undisclosed additional production is also possible.At the heart of Stewart’s strategy is valuation. By the company’s own calculation, it is trading well below its PGM peer group. Sibanye-Stillwater’s price-to-NAV was 0.96 in 2024, compared with an average of 1.75 for Valterra Platinum, Northam Platinum and Impala Platinum. On an enterprise value/ebitda basis, deemed a truer value than reflected in stock prices, the peer group trades at an average of 12.2 against 5.8 for Sibanye-Stillwater.The response to Stewart’s strategy among analysts, however, has been relatively muted. They are waiting for details on mine plans and price assumptions, and for successful execution. “Sibanye used the strategy update to slightly reframe the path forward [minor projects under evaluation] but the meatier updates to mine plans will have to wait,” says Ben Davis, an analyst for RBC Capital Markets.Nedbank Securities analyst Arnold van Graan adds: “If the company delivers on this strategy, we expect the valuation gap between Sibanye and its peers to start closing. As always, delivering on its operational and cost targets and generating free cash flow will remain a major driver of its valuation.”Precious boostHelpfully for Stewart, prices of precious and base metals are in the ascendancy once again, which will give a short-term boost to Sibanye-Stillwater’s financial results, scheduled for publication on February 20. The results will show a major reduction in net debt as Sibanye-Stillwater implements a reduction in project capital over the coming one to two years. Stewart says the plan is to cut gross debt by 50% to about $1.1bn in two years, while a $750m convertible bond will be reduced midyear, with the balance refinanced. While shareholders can expect dividends again after two years of lossmaking, there are no planned changes to the policy, which is set at 25%-35% of normalised earnings.What Stewart seems to be attempting is tricky. Traditionally, Sibanye-Stillwater is a company of metal price leverage, whereas the new strategy is aimed at attracting a premium for quality ounces through the cycle. That’s for its PGMs, but the company is also planning to commission its Keliber lithium project in Finland this year. Over time, the group hopes this production, deemed crucial to European battery-mineral supply chains, will also attract a premium. For now, however, the lithium has not traded at a level justifying refined production at Keliber.“I think we very much are focused on having a precious metals underpin. The reason for that is many of these critical metals are actually quite difficult to build businesses off,” says Stewart. “We’re seeing many people trying to do it. Small projects, short life of mines, rapidly changing supply dynamics. To have that critical underpin of a precious metals base is the way, I believe, that this can truly be unlocked in a value-creative manner,” he adds.For now, Sibanye-Stillwater as a leverage play is what matters to analysts. The company had “an impressive year in 2025”, says Davis. The shares gained 322% vs the VanEck gold index, up 143%, owing to its high beta to gold and PGM prices.“From here, even on a flat price outlook, we could see the valuation gap between its peers narrow on deleveraging, strategy clarification from the new CEO and capital returns,” he says. The upside case includes tariffs on palladium in the US, where Sibanye-Stillwater would be one of the few beneficiaries. “On spot prices, it prints an average 2026/2027 free cash flow yield of 22.3% and is trading on a 0.61 price-to-NAV,” says Davis.The post Mind the gap: Sibanye-Stillwater plans new era appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com