Sibanye-Stillwater Limited — FY2019 Form 20-F
Reporting period: Audited fiscal year ended 31 December 2019; filed 28 April 2020. This is an annual report, not a standalone Q4 filing, and the provided text does not give clear standalone Q4 financial results. Financial statements are prepared under IFRS as issued by the IASB, in South African rand. Historical statements are those of Sibanye Gold Limited, the group’s predecessor for consolidated reporting; a reorganisation under Sibanye Stillwater Limited took effect on 24 February 2020.
Business context and key financial metrics
The group mines gold and platinum group metals (PGMs) in South Africa and the United States, and operates a PGM recycling and metallurgical business in the US. The June 2019 Lonmin acquisition added the Marikana operations; their results are included for seven months.
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | R72.925bn | R50.656bn |
| Profit/(loss) for the year | R432.8m | (R2.521bn) |
| Profit/(loss) attributable to owners | R62.1m | (R2.500bn) |
| Adjusted EBITDA | R14.956bn | R8.369bn |
| Net cash from operating activities | R9.464bn | R12.197bn |
| Capital expenditure | R7.706bn | R7.081bn |
| Cash and cash equivalents at year-end | R5.619bn | R2.549bn |
| Current assets / current liabilities | R26.164bn / R14.327bn | R15.195bn / R14.633bn |
Adjusted free cash flow, a non-IFRS measure, was R319m versus negative R12m in 2018. The filing defines it as operating cash flow before dividends, net interest and deferred revenue advances, less property, plant and equipment additions. Adjusted EBITDA and related cost measures are also non-IFRS and may not be comparable across companies.
Debt and liquidity: Recourse borrowings were R26.551bn and cash, excluding Burnstone cash, was R5.586bn, giving reported net debt of R20.964bn. The reported net-debt-to-adjusted-EBITDA ratio was 1.4x; the covenant ratio was 1.25x because the covenant calculation annualised Marikana EBITDA. Both were within lender limits. The group had R5.688bn of committed undrawn facilities and refinanced its R6bn rand revolving facility with a R5.5bn facility in October 2019, including an accordion option. No dividend was declared.
Production and operating margins: PGM output was 2.2Moz (4E and 2E combined, as reported), versus 1.8Moz in 2018; gold production was 0.9Moz versus 1.2Moz. Adjusted EBITDA was R7.291bn for US PGM, R8.796bn for SA PGM (including Marikana) and negative R969m for SA gold operations excluding DRDGOLD. Reported AISC margins were 45% for US PGM and 20% for SA PGM; SA gold’s margin was negative 11%.
Material changes versus FY2018
- Revenue rose 44% and adjusted EBITDA rose 79%, supported by higher palladium and rhodium prices, a weaker average rand, and seven months of Marikana results.
- Total profit returned to positive territory from a loss, but only R62.1m was attributable to owners. The income statement included a R1.733bn mining and income tax credit, a R1.103bn Lonmin bargain-purchase gain, and a R6.015bn loss on financial instruments, mainly a fair-value loss on the convertible-bond derivative as the share price increased.
- SA gold operations were disrupted by a five-month AMCU strike ending 17 April 2019 and a gradual production ramp-up. Gold output excluding DRDGOLD fell 33%; the segment recorded an adjusted EBITDA loss.
- Rustenburg changed from purchase-of-concentrate to toll processing, delaying recognition of revenue and increasing inventory during the transition. Marikana contributed R11.188bn of revenue and R2.448bn of adjusted EBITDA for seven months.
- Net debt declined modestly from R21.269bn, while leverage fell from 2.5x to 1.4x on the reported basis. The 1.25x covenant ratio includes annualised Marikana EBITDA.
Outlook, management commentary, risks and unusual items
- COVID-19 outlook: Management said 2020 production guidance was likely to be adversely affected. South African operations were placed on care and maintenance during the national lockdown; limited operations resumed from 14 April subject to protocols. US sites reduced personnel and demobilised growth-project contractors, likely delaying Blitz. Management’s scenarios indicated available liquidity would not be exhausted, but outcomes were uncertain and depended on lockdown duration, commodity prices, exchange rates and the safe production ramp-up.
- Management priorities: Continued deleveraging, targeting net debt/adjusted EBITDA of 1.0x, and potential resumption of dividends during 2020 were planned before COVID-19 effects. Marikana integration and cost savings were priorities; the group reported an annualised synergy run-rate target of R1.2bn by end-2020. Management also launched a supply-chain cost-reduction initiative targeting R1bn over 12–18 months.
- Projects and operations: Blitz’s development was delayed by ground-control and ventilation challenges. Management’s pre-pandemic outlook anticipated US 2E production of 660–700koz in 2020, but the filing cautions that guidance could be affected by COVID-19. A force majeure notice from the mill manufacturer added uncertainty to the US concentrator expansion.
- Restructuring and labour: Gold operations were restructured; some shafts were closed or placed on care and maintenance. Marikana restructuring concluded in January 2020, with 1,142 employees involuntarily retrenched and contractor numbers reduced by 1,709. The group also reported six fatalities at SA PGM operations in 2019.
- Contingencies: The silicosis and tuberculosis class-action settlement was approved by the High Court; Sibanye-Stillwater provided R1.282bn for its estimated share and issued a guarantee of up to R1.372bn for specified trust obligations. A US securities class action remained at an early stage, with outcome and potential liability not estimable from the filing.
- Financial reporting controls: Management and the external auditor identified a material weakness in central treasury controls over timely recognition of foreign-currency cash receipts and corresponding trade-receivable settlement. Management said the misstatement was adjusted in the financial statements and remediation was underway. EY gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting; Marikana’s controls were excluded from the ICFR assessment.
- Other risks: Exposure includes volatile metal prices and exchange rates, South African policy and credit risk, labour and community disruption, electricity supply and cost, mine safety, operational delivery, debt covenants, environmental and closure obligations, and access to capital.
Most important facts for investors to verify
- Standalone Q4 results and the precise contribution and full-year run-rate economics of Marikana; the filing provides annual results and seven months of reported Marikana results.
- The basis and reconciliation of 1.4x reported versus 1.25x covenant leverage, and debt maturity, covenant headroom and liquidity after COVID-19 disruption.
- Whether the R1.2bn annualised Marikana synergies and the R1bn supply-chain savings target are achieved, net of restructuring costs and operational effects.
- The impact of COVID-19, the Anglo Platinum converter-plant force majeure and the mill-delivery force majeure on production, inventory, cash flow and guidance.
- Progress in remediating the treasury-control material weakness, and the eventual inclusion of Marikana in internal-control reporting.
- The ultimate cost and claims experience under the silicosis settlement, and developments in the US securities litigation and environmental rehabilitation obligations.