South African diversified miner Sibanye Stillwater is discussing with lenders to temporarily lift limits on borrowings, it said on Friday, after weak platinum group metal (PGM) prices drove earnings 72% lower in the March quarter.
Sibanye said average PGM prices were about 30% lower year-on-year, resulting in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declining by 72% to 2.137 billion rand ($116 million) in the quarter to March 31, from 7.755 billion rand last year.
Sibanye CEO Neal Froneman said in the update that declining earnings could impact the company’s debt covenants – formal agreements between a borrowing company and its lenders that the company will operate within certain limits.
The company was “proactively engaging with our lenders on temporarily raising our lending covenants,” Froneman said.
He said Sibanye was also “focusing on the balance sheet with a view to increasing liquidity through a number of non-debt instruments such as pre-pays and streams”.
On April 10, Froneman told Reuters Sibanye was weighing raising about $500 million through prepayment arrangements such as so-called metals streaming to shore up its cash position.
Metals streaming involves selling future metals production in return for an upfront cash payment.
The miner, which has rapidly expanded beyond gold and platinum and diversified into clean energy metals such as lithium, nickel and zinc, will ask shareholders at its May 28 general meeting to approve the conversion of $500 million bonds issued last year into shares.
If Sibanye shareholders vote against the conversion of the bonds into shares, then the convertible bonds will be settled using cash, negatively impacting the company’s financial position and limiting its capacity to invest in projects, fund operations, service debt and pay dividends.
($1 = 18.4026 rand)
(By Nelson Banya; Editing by Elaine Hardcastle)
