Sibanye-Stillwater gains momentum as U.S. regulation boosts Montana PGM operations

Oluwatosin Racheal Alabi -
Key Points
  • Sibanye-Stillwater’s Montana PGM operations will gain from new Section 45X regulations under the U.S. Inflation Reduction Act (IRA), ensuring vital funding for palladium and platinum mining.
  • In early 2024, the company posted a R7.5-billion ($425 million) impairment on its U.S. assets due to low PGM prices, alongside a 200,000-ounce production cut to manage costs.
  • The amended Section 45X now includes extraction costs for AMP credit, enhancing the sustainability of Sibanye-Stillwater’s U.S. operations in the long term.

South African mining giant Sibanye-Stillwater, which operates key platinum group metals (PGM) assets in the United States, is set to receive substantial financial support following the enactment of Section 45X under the U.S. Inflation Reduction Act (IRA). The new regulation, effective as of last week, will support Sibanye-Stillwater’s Montana-based operations, where the company’s Stillwater and East Boulder mines produce vital palladium and platinum products. This legislative update comes at a critical time as the company grapples with ongoing PGM market volatility.

Cost reductions amid market challenges

Amid an unfavorable market environment, Sibanye-Stillwater reported a R7.5-billion ($425 million) impairment charge for its Montana operations in the first half of 2024, driven by a significant drop in palladium and platinum prices. Both metals are essential to the automotive and clean energy industries, serving as effective catalysts for emission reduction and battery applications. In response, the company implemented a 200,000-ounce production cut to manage costs, though this measure alone could not offset the revenue gap caused by declining prices. The AMP credit now offers strategic support, essential in closing this revenue shortfall.

As palladium and platinum are designated as “critical minerals” in U.S. energy policy, the revised Section 45X aligns closely with Sibanye-Stillwater’s Montana operations, reinforcing its strategic role in the U.S. critical minerals supply chain.

The Inflation Reduction Act’s Section 45X

Originally passed in 2022, the Inflation Reduction Act marked a landmark shift in U.S. energy policy, encouraging clean energy production. Section 45X, a key provision, incentivizes the production of critical minerals through a 10% Advanced Manufacturing Production (AMP) credit. Initially, this credit applied only to the final stages of production, excluding critical extraction costs that constitute a major expense for mining companies. This limitation meant that Sibanye-Stillwater’s Montana operations saw limited financial relief amid declining PGM prices.

Following extensive lobbying efforts by Sibanye-Stillwater’s leadership, including CEO Neal Froneman, the updated Section 45X now includes extraction costs among eligible expenses for AMP credit. This change provides greater financial security for the Montana operations, particularly as they rely heavily on palladium and platinum production. The inclusion of previously excluded costs offers long-term stability for Sibanye-Stillwater’s U.S. assets, enabling the company to better manage volatility and stabilize its operations.

Market response reflects investor confidence

Following the announcement, Sibanye-Stillwater’s share price surged 6.91 percent on the Johannesburg Stock Exchange (JSE), adding to a recent seven-day rally of over 22 percent. This response highlights investor confidence in the impact of the updated Section 45X on the company’s U.S. assets.

CEO Neal Froneman described the regulatory change as a “turning point,” noting that the inclusion of extraction costs in the AMP credit will bolster the sustainability of the Montana operations. This support allows Sibanye-Stillwater to redirect efforts toward stabilizing production output and optimizing cost structures, a crucial advantage in a volatile global commodities market.

Beyond Financial Relief: Positioning in Critical Minerals

By advocating for regulatory updates to support its revenue streams, Sibanye-Stillwater not only secures its own financial stability but also strengthens its role in the U.S. critical mineral supply chain. This regulatory support positions the company as a reliable partner in the United States’ clean energy transition, enhancing its strategic value as a supplier of essential materials. Additionally, the new regulation opens doors for future investments, partnerships, and expansion, strengthening Sibanye-Stillwater’s competitiveness on the global stage.

For African billionaires and international investors with a focus on resource-based industries, Sibanye-Stillwater’s experience underscores the importance of strategic positioning, regulatory engagement, and resilience. With PGM demand projected to grow due to clean energy and technological applications, this case demonstrates how policy alignment can yield both immediate and long-term benefits.

In an unpredictable commodity market, Sibanye-Stillwater’s approach reveals how timely, strategic adaptation can drive success, offering valuable insights for investors in global mining and resource sectors.