Sibanye lambastes Moody's over downgrade



22-02-2019
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The Business Report
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JOHANNESBURG – Sibanye-Stillwater yesterday lambasted the decision by global rating agency Moody’s Investors Service to downgrade the precious metals producer.

Speaking during the financial results presentation yesterday, which saw Sibanye-Stillwater swing to a R2.5 billion headline loss in the year to December 2018, Sibanye-Stillwater's chief financial officer, Charl Keyter, questioned Moody’s methodology.

Keyter said the methodology flew in the face of the company’s plan to ensure compliance with its covenants and keeping liquidity levels in check.

“In my view, the Moody's methodology is fatally flawed,” he said, adding the company would be on a stronger footing in the next nine months.

Moody’s this week downgraded Sibanye to Ba3 from Ba2 with a negative outlook, flagging the increasing refinancing risks for the company’s R6 billion revolving credit facility, which matures in November 2019.

It also said the unresolved strike at its gold mines had continued significantly longer than what Moody’s would have expected and reflected heightened operating risks for the company.

“Nothing has changed. We still operate in South Africa and we have to manage that,” said Keyter.

The Association of Mineworkers and Construction Union (Amcu) is leading a three-month strike at Sibanye’s gold operations, which partly contributed to the 16 percent decline in year-on-year gold production to 1.17 million ounces.

Sibanye-Stillwater impaired the Driefontein and Beatrix gold mining assets by R2.172bn and R167 million, respectively, as ongoing losses at the operations negatively had hit cash flow and the economic viability of other operations.

The company said the financial and production performance of its platinum group metals (PGM) mines had compensated for problems at is gold operations.

The company said its local PGM operations posted a robust performance, with full-year 4E PGM production of 1.7 million ounces for the year ended December 31, 2018 exceeding the upper limit of guidance.

Amcu this week also threatened to shut the local mining industry amid plans for a secondary strike in the platinum and coal sectors next week.

Keyter said the company had approached its lenders to request a temporary covenant amendment to address a potential breach of its covenant ratios as a result of the strike and the Rustenburg operations contract.

“At this time the management believes that the covenant ratio levels agreed will be complied with in Q2 (second quarter) 2019 and onwards,” he said.

There has been no end in sight for the strike, which has seen the company burn between R15m and R20m a day.

Neal Froneman, the chief executive of Sibanye-Stillwater, accused Amcu of being irresponsible and aiming to promote “a more parochial agenda”.

He said a compromise was needed to end the strike.

“A compromise is required as long as it does not undermine other unions. We know that our employees are desperate to see the end of the strike,” he said.

A total of 15 000 Amcu members went on strike in November, demanding higher wages.

Froneman said he did not believe there was enough support for Amcu’s planned secondary strike. “We are preparing for the second strike,” he said.

Sibanye has received a backlash from organised labour on the proposed restructuring of the loss-making Driefontein 2, 6, 7, 8 shafts and the Beatrix 1 shaft.

“It is our legal right to restructure the operations, and we will do it,” Froneman said.

The company said last week that it had given notice in terms of section 189A of the Labour Relations Act that it would be commencing formal consultations with employees regarding the possible restructuring of the gold shafts.

Sibanye’s shares closed 3.96 percent lower at R15.05 on the JSE on Thursday.

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