- Sibanye Stillwater Reported Massive Loss of 37.4 Billion Rands, Wiping Out Previous Profits
- Commodity Price Decline Affected Operations
- The Company Faces Restructuring and Project Cutbacks Amid Economic Challenges
Harare- Sibanye Stillwater, a renowned PGMs firm, has reported a significant loss of 37.4 billion Rands for the six-month period ended 31 December 2023, for the full year 2024. This loss translates to a decrease of US$2 billion from a profit of US$1.2 billion in 2022.
Sibanye achieved a remarkable level of profitability in 2021, followed by a solid profit of 1.2 billion in 2022. However, these profits were completely eroded in 2023 due to the significant decline in platinum prices. The American palladium mines owned by Sibanye were particularly affected by this price rout.
In light of these challenges, Neal Froneman, the CEO of Sibanye, emphasised that the company's earnings would continue to face considerable pressure.
Moreover, given the ongoing inflationary pressures, it may be necessary to undertake further restructuring measures to address the situation effectively.
The decline in commodity prices, particularly for platinum group metals, has been observed since 2023. This decline is attributed to two main factors: geo-economic fragmentation, which has slowed down the uptake of industrial resources, and the growing demand for clean energy, which has given lithium a competitive advantage over other metals.
It should be noted that the advantage of lithium over other metals is discussed separately from the recent economic challenges that have arisen lately under the rule of the ANC. These challenges include difficulties in managing power supply, controlling inflation, and maintaining diplomatic relations with the West. These have increased cost pressure especially on miming firms in South Africa.
Furthermore, factors such as a slowdown in the Chinese economy, high inflation rates, and complications in the property market have also contributed to the overall decline in demand for industrial commodities.
Due to the decline in commodity prices, Sibanye Stillwater has made the decision to scale back its major projects, including the expansion of mining at Mimosa, where they aimed to acquire a new resource of 1.5 million ounces of platinum.
The company planned to spent US$100 million to develop a new mining area, North Hill to replace the waning South Hill. Mimosa is co-owned by Impala Platinum and Mimosa itself. In the previous year, the co-owned company produced 116,308 ounces, which was consistent with the production in 2022.
However, this year, the company has faced numerous challenges, from falling global metal prices to a 40% increase in electricity costs, which now account for 22% of mining revenues.
As a result, the company has beenforced to abandon key projects and downsize its management teams in order to reduce costs. This cost-cutting measure is in line with what other companies, such as Musk's X and Amazon, have done to manage their expenses.
Zimplats, another company in the industry, has also experienced losses due to the decline in commodity prices. The slow global economic growth has led to an oversupply of commodities and low demand, which has negatively impacted prices.
This downturn in the mining industry poses a major challenge for Zimbabwe, a landlocked country that heavily relies on mining commodities for its foreign exchange supply. Mining accounts for over 60% of the country's forex supply, primarily driven by gold and PGMs.
With the rapid depreciation of the local currency, there will be an increased demand for foreign exchange in the country. This year, in particular, is expected to be challenging, not only for corporations but also for the general population.
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