Sibanye-Stillwater has reason to be optimistic following the United States government’s enactment of new regulations aimed at reducing production costs for critical minerals, including platinum group metals (PGM), on Thursday.
The diversified miner on Friday said it believed these legislative changes could help safeguard the long-term viability of its struggling palladium and platinum operations in Montana.
This comes as Sibanye-Stillwater reported a hefty impairment of R7.5 billion to its US PGM operations for the six-month period ending in June.
The company has already announced plans to curtail production by 200,000 ounces amid a backdrop of plummeting metal prices, which ultimately led to a half-year loss.
According to commodity analyst Giovanni Staunovo, this drastic measure was unavoidable given the circumstances.
Now, Sibanye-Stillwater has received some respite after the US government published new regulations last week, detailing inflation reduction measures.
Sibanye-Stillwater said that Section 45X of the Inflation Reduction Act (IRA) “will benefit our US PGM operations” in Montana. Shares in the company surged by 6.91% on the JSE on Friday to R22.11, extending a 22.83% and 17.54% rally in the past seven and days 30 days respectively.
“The final release of S 45X is particularly significant for our group. By providing essential financial support for our US PGM operations as we focus on reducing costs and increasing productivity to stabilise our US PGM operations we will be able to secure the long-term viability of these strategic assets,” said Neal Froneman, CEO for Sibanye-Stillwater.
The US Congress initially passed the Inflation Reduction Act in 2022 aimed at encouraging domestic production of clean energy components. Section 45X under the new regulations was introduced in 2023, proposing a 10% Advance Manufacturing Production credit (AMP credit) for the production of products including palladium and platinum, both of which were classified as critical minerals.
Additional guidance was provided in December last year, including extraction costs of producing critical minerals from those costs eligible for the 10% AMP credit, with the final refiner of critical minerals entitled to claim the majority of the AMP credit, resulting in a much narrower benefit for the industry.
However, the omission of extraction costs from the proposed S 45X credit regulations had excluded the vast majority of the costs incurred by the US PGM operations from being eligible. This had resulted in little financial benefit or support for the operations, Sibanye-Stillwater explained.
It had subsequently filed extensive written submissions to the proposed regulations and lobbied the US Congress and government to amend the proposed regulations to allow for the inclusion of costs associated with extracting, processing, recycling, as well as the refining of critical minerals.
These proposals have now been passed, providing a major respite for the company in light of persistently lower PGM prices across global markets.
“The final IRA and S 45X regulations appear to have adopted the proposed amendments submitted by the group, allowing for the inclusion of extraction costs when claiming the critical minerals production AMP credit along with processing and refining costs,” said Sibanye-Stillwater.
“These amendments seem very favourable and are likely to provide substantial relief for the US PGM operations in Montana, supporting their continued operations and long-term sustainability.”
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