The Stillwater palladium mine in Montana has performed many functions under the ownership of Sibanye-Stillwater, the JSE miner. When the group first bought it in 2017 for $2.2bn, it was the showpiece asset of former CEO Neal Froneman’s bold expansion.
During the violent strikes at Sibanye-Stillwater’s gold mines in 2018 and 2019 when AMCU’s leader Joseph Mathunjwa was at his most prominent, Stillwater was a geographic diversifier. It gave Froneman the confidence to stare down AMCU: we don’t need troublesome South African production when we have conflict-free ounces elsewhere, Stillwater seemed to declare.
Then, in July 2024, Froneman again cited Stillwater and the firm’s new investment in Finland’s lithium industry — Keliber — as a demonstration of strategic geopolitical support. Sibanye-Stillwater stood with the West in securing mineral supply chains against Chinese dominance.
These days, Sibanye-Stillwater is under the leadership of a more pragmatic CEO in Richard Stewart. He has focused the group on cost efficiency and sensible organic expansion on owned resources. In this phase, Stillwater is now back as a diversifier. In a world of limited new platinum group metal supply, Stillwater is the only major producer outside Russia and Southern Africa.
It also provides optionality. A high grade mine — though with troublesome geology — Stillwater can continue for 40 years in the right conditions. Unfortunately, costs at Stillwater have spiralled. The group cut back planned production of 800,000oz/year (mainly palladium, and some platinum) to about 280,000oz/year. The reduction, however, has provided an opportunity to convert mining practice to mechanisation.
But for this to happen, Sibanye-Stillwater needs its US miners to embrace new incentive packages based on team performance. “In the past, the miner (the US equivalent of the rock drill miner in a South African mine) ruled the roost. Now, in terms of greater mechanised mining, they no longer are,” says one market source. The outcome of this change is employee unhappiness. Charles Carter, head of Sibanye-Stillwater’s international operations, acknowledged Stillwater’s miners were reluctant to cast off 20 years of working habit for another, new-fangled approach that may not guarantee success.
Stillwater has to cut costs to $1,000 per PGM ounce on an all-in sustaining cost basis in order to survive at Sibanye-Stillwater’s admittedly conservative long-term palladium price of $1,100/oz. The metal is currently trading at nearly $1,400/oz and is therefore hovering at breakeven (AISC was $1,347/oz for the six months ended June). But that is before embarking on any expansion capital. Palladium, it must be noted, is also a PGM with the least attractive long-term outlook.
What has made Stillwater’s outlook more complicated is that employees are on strike.
A portion of Stillwater East’s employees, miners represented by the US Steelworkers Union, downed tools on September 2. Sibanye-Stillwater’s response was to issue an ultimatum, saying employees had to accept the mechanisation plan — or else: “If that plan cannot be implemented and the operations remain unsustainable, there may ultimately be no viable basis for the continued operation,” said Stewart.
It raises the question as to whether Sibanye-Stillwater needs Stillwater for Stewart’s new leadership to succeed. The answer: probably not. About 60% of Sibanye-Stillwater’s interim ebitda this year was from its South African PGM production; the balance was from gold, also in South Africa. There can’t be much room for cash burn if Stewart’s newly minted strategy of pragmatic optimisation and expansion of existing assets is to work. More allowance will be given to lossmaking at Keliber, which is still ramping up, than to Stillwater, a mine that has been operating since 1986.
Steve Shepherd, a former rated analyst who never stepped back from the big questions, asked Stewart whether Stillwater was worth the effort. “Apart from a few years, it’s been either loss-making or marginal. Is the risk/reward really worth it? Is it core to Sibanye-Stillwater?” he asked.
The mine is highly leveraged to PGM prices, Stewart replied. Stewart also alluded to Stillwater’s strategic importance as a US asset and diversifier to Southern African and Russian PGM production. “Having the flexibility of an operation in a geographically different region is, I think, critically important and strategic.” He added, however: “Does that mean we’ll keep an operation running at a loss forever? No — of course there’s a limit, and there’s a line.” It’s fair to say, employees are testing that line now.
The likelihood is an agreement with employees will be reached, but this doesn’t solve the question as to Stillwater’s long-term place in Sibanye-Stillwater. If it shuts, the curtain comes down on Froneman’s vision of Sibanye-Stillwater as on-shored Western ally. Having backed out of a lithium boron mine in Nevada, Sibanye-Stillwater will only operate recycling facilities in the US.
It also means the loss of more than 1,000 jobs that will be hard to replace. Miners in Montana’s Stillwater earn more than double the state’s average wage, according to the US Bureau of Labor Statistics, or as much as $100,000 a year before the bonuses that are now being negotiated. There’s much at stake for all concerned.
