FOUR South African banks have sprung to the rescue of loss-making Sibanye-Stillwater after agreeing to extend debt covenant limits for the period June 30 to June 2025, giving the company immense respite in light of challenges that include poorly performing platinum group metal (PGM) prices and labour unrest across its operations.
After sinking to a $2 billion (R37.4bn) loss for 2023, Sibanye-Stillwater has been retrenching across its gold and PGM operations, while it is also throttling capital, in addition to shutting down poorly-performing shafts.
As at the end of December 2023, Sibanye-Stillwater had a debt of R11.9bn against the backdrop of a debt leverage that is below the required 2.5x covenant limit.
Lenders in Sibanye-Stillwater, consisting of four South African banks and 11 international finance institutions, have now “agreed to uplift the leverage covenant limit” for all of the miner’s credit facilities “from the current 2.5x net debt to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), to 3.5x for the period from 30 June 2024 to 30 June 2025”.
This includes an adjustment to 3.0x for the period from July 31, 2025 to December 31, 2025.
Moreover, the interest cover covenant for Sibanye-Stillwater has also been amended in line with the leverage covenant, and the $1bn revolving credit facility (RCF) revised to include a letter of credit facility and an ancillary facility.
Sibanye-Stillwater chief executive Neal Froneman said all this will “improve the facility’s flexibility” and application.
“The early uplift of our existing RCF covenant limits agreed to by our lending banks, is a significant indication of support and vote of confidence in the fundamental outlook for the group,” Froneman said.
“Although the group’s leverage is currently well below our existing 2.5x covenant limits and remains undemanding, the additional headroom resulting from the uplift provides further financial flexibility and should provide the market with increased confidence in the outlook for the group.”
The company had previously stated its intentions to uplift its debt covenants in addition to proactive evaluation of various non-debt capital instruments such as pre-pays and streams in order to secure the integrity of its balance sheet.
This would help guide the PGM and gold miner through the commodity price cycles when necessary.
The latest agreement with lenders covers Sibanye-Stillwater’s $1bn revolving credit facility, a R5.5bn revolving credit facility as well as its Silicosis Guarantee Facility.
At its annual general meeting last month, Sibanye-Stillwater passed a special resolution to “amend the guarantee of indebtedness of members of the group” under the respective credit facilities.
Sibanye-Stillwater raised its PGM production by 3% to 414 918 ounces during the quarter to the end of March 2024, despite closing non profitable shafts.
Its South African PGM production for the quarter received a boost from the acquisition of an additional 50% of Kroondal from Anglo American Platinum.
Froneman has remained bullish about the outlook for bullion prices, even as the company has battled through its restructuring of operations as workers feel hard done by from the subsequent retrenchments.
“The fundamental outlook for gold remains constructive, with limited apparent downside for the gold price for the balance of 2024,” Froneman said.
“Our view that the fundamental outlook for PGMs is positive is unchanged, with little evidence of a systemic change in the market fundamentals to justify the price collapse observed during 2023.”
Sibanye-Stillwater’s share price closed 1.4% down to R21.27 per share on Friday.
BUSINESS REPORT