These are the days (if you’re a miner)

Excellent results from Sibanye-Stillwater and Exxaro round off a week of record profits for miners.
Image: Ian Waldie/Bloomberg

It’s times like this that make mining such a fascinating business to be in. You spend years getting costs under control and then wait for the inevitable commodity cycle to rain down the riches.

The last two weeks have been spectacular for those reporting results. Records were broken all round.

This week coal, energy and ferrous miner Exxaro’s shares hit an all-time high after more than doubling profit to R4.8 billion for the year to December 2021.

Precious metals miner Sibanye-Stillwater’s shares likewise broke above its previous rand high after banking R172.2 billion in revenue, up 35% on the previous year to December 2020, with adjusted Ebitda (earning before interest, tax, depreciation and amortisation) ramping up 39% to R68.6 billion. All this was thanks to what some regard as the return of the interrupted commodity supercycle of a decade ago.

Miners are drowning in cash, and have been generous in their distributions to shareholders. This follows a week of outstanding results from the Anglo stable, with Anglo American (AAC), Anglo Platinum and iron ore producer Kumba releasing record results. AAC declared a special dividend of $0.50 a share on top of a final dividend of $1.18, bringing to $4 billion the distribution to its shareholders for 2021.

Read: Anglo American CEO Mark Cutifani exits on the crest of a wave

Impala Platinum’s interim results to December 2021 may show revenue flat at R55.6 billion and sales slightly down, but this comes after full year results to June 2021 that were spectacular. Impala won’t be too concerned about the mid-term speed wobble. Shareholders will be delighted that it has just added decades to its lifespan through the likely majority acquisition of the low-cost, shallow and highly mechanised neighbour, Royal Bafokeng Platinum.

There were plenty records broken at Gold Fields too, with South Deep reciprocating the love and treasure showered on it over the years by increasing attributable production by 29% to 293 000 ounces. With geopolitical tensions rising in Eastern Europe, there is good cause to believe that gold’s time to shine has finally arrived after two years of indifference. Gold Fields’s total production for the year was up 5% to about 2.3 million ounces, about half of that from Australia.

Exxaro’s coal revenue was down 13%, but Ebitda from this part of the business was up 38% to R10.7 billion (2020: R7.7 billion) helped by higher realised prices and a favourable exchange rate.

The group’s energy businesses, which include the Cennergi wind farms acquired earlier in the year, shows a normalised Ebitda margin of 80%, which should provide an earnings buffer in years when the commodity cycle weakens. Core Ebitda for the year was R914 million.

The equity-accounted income from the Exxaro’s stake in Sishen Iron Ore Company (SIOC) jumped by 48% to R9 billion.

Sibanye-Stillwater’s normalised earnings for 2021 increased by 27% to R38.9 billion, despite a sharp drop in precious metals prices in the second half of the year.

The SA platinum group metals (PGM) operations did particularly well, with production of 1.8 million ounces, well above the guided range for 2021, with all-in sustaining costs (AISC) well below the lower end of guidance range. Gold production came to 27 747kg (892 087oz) from the SA gold operations (excluding DRDGold) for 2021.

Shareholders were well rewarded with bumper dividends all round. Analysts debated whether these lofty commodity prices are sustainable, and many believe they are. The war in Ukraine pushed precious metals higher, though not alarmingly so, with oil being the one to watch as Brent crude oil broke above $110 a barrel. Prices like these spell dark days ahead for consumers, but fabulous riches for producers. Precious metals and energy prices are bound to remain high as long as supply bottlenecks are threatened by war, and that will help local miners as the new financial year kicks off. It’s a bleak thought, but in all crises there are winners and losers.

Read: Oil resumes wild rally as Ukraine says nuclear plant attacked

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