Sibanye-Stillwater ADR (SBGL, Financial) addressed investor concerns after its stock saw a significant drop on the New York Stock Exchange in the first three weeks of May. Year-to-date, the stock is down 47% to $2.58 a share.
The South African gold miner reports that the significant depreciation may have been a consequence of mounting concerns over a highly leveraged balance sheet and a number of recent safety incidents.
Concerning the balance sheet, Sibanye-Stillwater clarifies that the notable change in the capital structure of the company is transitory and reflects its transformative growth as a leader in the Platinum Group of Metals (PGM) industry.
In addition, Sibanye-Stillwater reported that it is studying several possibilities to reduce its total financial burden. The company reports a balance sheet that is solid with a net debt-to-adjusted earnings before interest taxes depreciation and amortization (EBITDA) of 2.4 times at the end of the first quarter of fiscal 2018. The company says that “this is well below prevailing covenant levels of 3.5x, as well as below longer term covenant levels of 2.5x.”
The company's financial outlook will improve further because it has doubled by $600 million the amount of the credit line available at its U.S. facility. The South African miner has restructured the debt profile of its entire group. The debt profile of the group has been reorganized in a way that the first due date of the high yield and convertible bond instruments falls between June and July 2022.
The company targets a net debt-to-adjusted EBITDA ratio of 1x to be pursued through a financial strategy that doesn't involve equity financing.
Sibanye-Stillwater also assured safety standards for workers are in place and being strictly followed. On Friday, Reuters reported that a miner was killed at Sibanye-Stillwater's Driefontein gold mine, where seven workers died four weeks ago following a seismic event.
The miner has resumed operations at Kloof and at all the shafts of Driefontein after the seismic event that occurred at the Masakhane mine on May 3. The incident had a 0.4% impact on gold production that was estimated for full fiscal 2018. Operations at Masakhane are still suspended because the team is still assessing the damages. Sibanye-Stillwater projects a gold production of 1.24 million ounces to 1.29 million ounces for full fiscal 2018.
Sibanye-Stillwater is also taking steps to reduce the cost of operations in the South African region.Ă‚
The miner also reports that its acquisition of Lonmin is on track and will positively add to earnings. Sibanye Gold says that it “remains convinced by the compelling strategic rational of this transaction.”
Sibanye-Stillwater is trading at $2.58 per share with a market capitalization of $1.36 billion. So far this year, the stock has lost 47% underperforming the Van Eck Vectors Gold Miners ETF (GDX) by 41%:
According to GuruFocus, the South African stock has a volatility of 63.53%. The current share price is a 52-week range of $2.44 to $6.50 per share.
The price-book ratio is 0.73 times versus an industry median of 2.06 times.
GuruFocus indicates an EV-to-EBITDA ratio of 11.1 versus an industry median of 9.90 times.
(Disclosure: I have no positions in any security mentioned in this article.)
