Sibanye Stillwater (SBSW) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the period increased by 44%, driven by a 69% increase in US PGM operations, which amounted to ZAR11 billion, due to a 37% higher average 2E basket price and a 9% weaker exchange rate [40] - Adjusted EBITDA reached just under ZAR15 billion, representing a 75% increase, with Marikana contributing ZAR2.5 billion for the seven months it was part of the business [44] - Profit for the period was ZAR433 million compared to a loss of ZAR2.5 billion in 2018, indicating a significant turnaround in financial performance [48] Business Line Data and Key Metrics Changes - The South African PGM operations saw an 82% increase in revenue, contributing just under ZAR12.5 billion, with Marikana operations contributing ZAR11 billion in just seven months [41] - South African gold operations, including DRD, decreased by 5%, impacted by a 33% reduction in ounces produced due to industrial action [42] - The adjusted EBITDA margin for US operations reached nearly 60%, showcasing strong profitability from high-grade operations [25] Market Data and Key Metrics Changes - The average US dollar basket price for 2019 was just under $1,400 per ounce, which increased to about $2,300 per ounce today, reflecting significant market price improvements [42] - The South African basket price for PGMs on a 4E basis averaged ZAR21,700 in 2019, now at approximately ZAR36,000 per 4E ounce, indicating a substantial rise in commodity prices [42] - The company noted that palladium and rhodium are in deficits for the foreseeable future, which is expected to support higher prices [10][20] Company Strategy and Development Direction - The company aims to strengthen its position as a leading international precious metals mining company by building a values-based culture and enhancing safety performance [55] - The strategic focus includes significant investment in environmental, social, and governance (ESG) initiatives, with a commitment to improving environmental positioning [11] - The company is targeting gross debt reduction from approximately $1.8 billion to $1 billion, indicating a focus on deleveraging and financial stability [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational performance for 2020, anticipating a potential doubling of adjusted EBITDA based on current commodity prices [8] - The company highlighted the successful integration of Lonmin and the establishment of a credible relationship with unions, which is expected to benefit future operations [7] - Management noted that the market for palladium and rhodium remains tight, with no immediate changes expected in supply dynamics, which could lead to sustained high prices [20][22] Other Important Information - The company completed the acquisition of a strategic stake in DRDGOLD, which is expected to enhance its environmental and ESG initiatives [32] - Significant synergies from the Lonmin acquisition are projected to reach ZAR1.2 billion by the end of 2020, exceeding initial estimates [30] - The company has established a large reserve base of 63 million ounces of gold and PGM reserves, with a significant portion located in the US [16] Q&A Session Summary Question: What are the expectations for future commodity prices? - Management indicated that palladium and rhodium are expected to remain in deficit, supporting higher prices in the near term [10][20] Question: How is the integration of recent acquisitions progressing? - The integration of Lonmin is on track, with management reporting no industrial action during the restructuring process, which is crucial for sustainability [28] Question: What is the company's approach to dividends moving forward? - The company plans to resume dividend payments in the first half of 2020, with a commitment to pay at least 25% to 35% of normalized earnings [49]