JOHANNESBURG (miningweekly.com) – Precious metals mining company Sibanye-Stillwater in 2021 delivered another record financial performance, with revenue of R172.2-billion and adjusted earnings before interest, taxation, depreciation and amortisation (Ebitda) of R68.6-billion.

Revenue was 35% higher than for 2020 and Ebitda 39% higher. Record profit attributable to shareholders of R33.1-billion and adjusted free cash flow of R37.4-billion underpinned increased returns to shareholders, with successful delivery of all other elements of the group's capital allocation framework exceeding expectations that were set at the beginning of the year.

The green metals strategy of the Johannesburg- and New York-listed company, headed by CEO Neal Froneman, also advanced significantly during the year, with strategic positions secured in key jurisdictions close to rapidly growing battery production markets in Europe and North America.

Project capital has begun to be expended on the K4, Burnstone and Klipfontein projects for future operational sustainability.

The new innovation and market development BioniCCubE research and development fund was approved.

Yearly 2021 production guidance achieved by all the operating segments provided a solid base for improved group profitability on the back of robust commodity prices, Sibanye-Stillwater stated in a media release to Mining Weekly.

The operating performance of the platinum group metal (PGM) operations in South Africa in 2021 was particularly strong, with production of 1 836 138 four-element ounces. This was above the upper end of the guided range for 2021.

All-in sustaining cost (AISC) was well below the lower end of yearly guidance and lower year-on-year.

Gold production of 27 747 kg (892 087 oz) from the gold operations in South Africa – excluding DRDGold – was within yearly guidance with production of 14 348 kg (461 299 oz) for the second half of 2021. This was 7% higher than for the first half, despite about 600 kg (19 300 oz) less production as a result of the safety stoppages towards the end of the year.

Two-element (2E) PGMs production of 570 400 2E ounces from the company’s PGM operations in the US was within the lower end of revised yearly guidance, impacted by ongoing regulatory and self-imposed restrictions after the fatal accident at the Stillwater West mine during June.

The US recycling business, the company said, had another strong year, achieving planned throughput and generating strong cash flow through active supplier management and the drawdown of spent catalyst inventory towards the end of the year.

Normalised earnings for 2021 increased by 27% to R38.9-billion ($2.6-billion) year-on-year, driven by the strong first-half performance, with normalised second-half earnings of R14.5-billion ($963-million) 34% lower than for the second half of 2020. This was primarily owing to a sharp decline in precious metals prices during the period, the company stated.

The board approved a final dividend for the second half of R5.3-billion ($342-million) or R1.87 a share, which is at the upper end of the group dividend policy range of 25% to 35% of normalised earnings.

Together with the record first-half interim dividend of R8.5-billion ($565-million), this represents a leading yearly
dividend yield of 9.8% for 2021. In addition to the record dividends, 5% of issued capital was repurchased between June and October.

The robust financial year-end position of cash and cash equivalents of R30.3-billion exceeds borrowings of R18.8-billion, resulting in a R11.5-billion net cash position and a net cash to adjusted Ebitda ratio of 0.17x.

SAFETY

Tragically, and in direct contrast to improving safety trends, fatal incidents persisted during the second half of last year, with 12 fatalities during the period.

In total, the group suffered 20 fatalities during 2021, a significant deterioration from the nine fatalities of 2020 and six fatalities of 2019.

A similar regression in fatal incidents was evident throughout the South African mining industry in 2021, with 74 fatalities experienced in total compared with 60 lives lost during 2020.

The reasons for this industry-wide regression, the company said, were unclear, with the extended burden of Covid-19
having been a mentally, emotionally and physically depleting factor.

“The safety and health of our workforce of more than 80 000 people is our foremost priority and during the fourth quarter of 2021, decisive action was taken to address the ongoing occurrence of fatal safety incidents,” the company stated.

Management interventions included safety stoppages across the group for a five-day period to enable full and comprehensive audits of all the operating areas and to re-emphasise the primary focus on safety for all employees.

Subsequent to this group-wide intervention, however, a series of fatal incidents occurred towards the end of November at the South African operations, and a decision was made to suspend specific high incident shafts which
collectively accounted for 12 of the group fatalities for 2021.

On December 3, operations at the Kloof 1 and Beatrix 1 and 3 shafts at the South African gold operations and the Rustenburg Khuseleka shaft at the South African PGM operations were suspended to address the regression in
safety. In addition, the Omicron variant of the Covid-19 virus resulted in an increase in infections towards year-end which impacted the availability of supervisor and senior management at the Rustenburg Thembelani shaft. In the interests of the safety of employees, production at this shaft was also suspended.

“Our primary objective is to continuously reduce operational risk and the company will not hesitate to halt operations should elevated risk require appropriate remedial action,” the company stated.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

Steady progress has been made in 2021 towards “embedding ESG excellence as our way of doing business”, with steps having been taken to establish private renewable power production facilities at operations.

Progress has also been made to secure water independence at South Africa’s gold and PGM operations, with a path to carbon neutrality by 2040 having been defined.

Primarily owing to the exposure of South African gold and PGM operations to unreliable supply, rising tariffs and carbon-intensive electricity generation from Eskom, its primary focus is on reducing the relatively high energy consumption and carbon footprint.

The South African operations account for 92% of total group energy demand and contribute 89% to Scope 1 emissions and 97% to Scope 2 emissions.

Focussed interventions at the South African operations achieved a 201 GWh reduction in energy consumption against the production adjusted energy plan. This reduction is equivalent to avoidance of 212 954 t of carbon dioxide equivalent in Scope 2 emissions.

In total, the group achieved a reduction in total energy intensity to 0.56 GJ/t milled for 2021, which represented a 7.1% decline compared with 2020 and a 2.4% decline compared with the average total group energy intensity for the last three years.

Grid-supplied electricity from Eskom accounted for about 93% of group greenhouse-gas emissions (Scope 1 and 2) for 2021.

As a result, the deployment of renewable energy has been identified as the company’s strongest decarbonisation lever.

Easing regulatory constraints, including the "power for own use" generation licence threshold being lifted to 100 MW and positive indications on wheeling and the ability to trade surplus power with third parties, along with the approval of the K4 project, which has significantly extended the life of the Marikana operation, have facilitated an increase in the scope of planned renewable energy projects in South Africa to a total generation capacity of 557 MW.

This includes:

• 50 MW of solar generation at the South Africa gold operations, with a local project developer having been appointed on the basis of a 20-year power purchase agreement (PPA), with construction scheduled to begin during the second half of this year and commercial production planned for the second half of 2023;
• 175 MW of solar generation at the South African PGM operations, with a request for proposals process to appoint project developers for three separate sites scheduled to be held in the second half of this year and commercial operation planned for early 2025; and
• 332 MW of remote wind energy generation, for which three ‘shovel-ready’ projects have been secured through local project developers on a 15-year PPA basis. Financial close of these projects is targeted for the second half of this year, with commercial operation anticipated during the second half of 2024.

The total capital cost of the renewable projects is forecast at R11-billion which will be funded through off-balance sheet PPA financing over 15- to 20-year terms. The cost of power from the solar projects is expected to be 30% to 50% lower than forecast Eskom tariffs, escalating at consumer price inflation from commercial production.

Wind power is expected to be 20% to 30% lower, allowing for partial reduction of operational risk associated with exposure to erratic supply and escalating energy costs in South Africa.

Once fully operational, these projects will enable a 25% reduction in Scope 2 emissions by 2025, exceeding Sibanye-Stillwater’s target of 20% of total energy production from renewable energy by 2030.

The planned renewable projects would, the company added, also create employment within its host communities during construction and operation. Moreover, plans were being advanced to foster local socioeconomic development through the company’s ‘Infrastructure for Impact’ programme, which included the provision of excess electricity supply to communities and social-development projects post the closure of the operations.