South African tycoon Neal Froneman-led Sibanye seeks debt covenant relief after profit plunges

Multinational precious metal mining company Sibanye-Stillwater, led by South African magnate Neal Froneman, is in talks with lenders to ease debt covenants after lower platinum group metal (PGM) prices squeezed earnings.

The company, joining peers Anglo American Platinum and Impala Platinum Holdings in reporting tumbling profits last year as platinum, palladium, and rhodium prices slumped, is facing renewed pressure in 2024. The trend continued into the first quarter, prompting Sibanye to explore prepayment deals to sell future metals production and shore up its cash position.

Sibanye prioritizes cash flow, as EBITDA plunges

“We are prioritizing balance sheet strength by pursuing various non-debt options to improve liquidity,” Sibanye said in a statement, mentioning prepayment deals and streaming agreements. The company added it’s “proactively engaging” lenders on a temporary loosening of loan covenants.

Sibanye’s first-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) plunged to R2.14 billion ($116 million) from R7.76 billion ($421.55 million) a year earlier, a 72.42-percent decline.

The company swung to a full-year 2023 loss of R2.49 billion ($132.1 million) after a R103-million ($5.5 million) profit in the prior year. The $132.1-million loss stemmed from writedowns on subsidiary investments totaling $2.27 billion, reflecting lower PGM prices.

Sibanye’s strategic positioning under Froneman

South African mining magnate and leading business executive, Neal Froneman, who holds a 0.3-percent stake (8,382,849 shares) in Sibanye, has steered the company to become a global leader in precious metals.

With operations spanning South Africa and various projects in South America, Sibanye-Stillwater, under Froneman’s leadership, has solidified its position as a top producer of platinum, palladium, and gold.

However, the company now faces a critical juncture, needing to navigate a series of impairments and potential covenant breaches to secure its financial future.