Montana Mining Muscle

Nye, East Boulder and smelter give Sibanye-Stillwater a silver lining in a challenging first half of 2019
By: 
Marlo Pronovost
Thursday, September 5, 2019
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SCN photo by Marlo Pronovost
          
            A muck truck leaves the Benbow portal at the beginning stages of the Blitz Project.

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Photo by Lee Wilder

Pictured from the left: Chairman of Board of the Stillwater Valley Weed Council Tim Schaff, Sibanye-Stillwater CEO Neal Froneman and President of Stillwater Protective Association Van Wood.

Business is good at the Sibanye-Stillwater mines at Nye, East Boulder and the Metallurgical Complex in Columbus.

Very good.

During the first six months of 2019 (referred to as H1 for first half), the Nye and East Boulder mine sites brought in a total of $208 million (before taxes). That marked a 36 percent increase from the same period in 2018.

The recycling operations at the smelter in Columbus saw a record PGM (Platinum Group Metals) feed following the commission of an expanded furnace, resulting in a record $21.5 million in H1.

SILVER LINING FOR THE GLOBAL PGM COMPANY

The Montana success was a much-needed cushion for the South African gold and PGM company. During the first half of 2019, the company’s overall revenue was down, attributable to 28 percent reduced PGM operations in South Africa and a 53 percent decrease at one gold mine due to a 5-month strike.

Strong performances in Montana at a critical time also helped reinforce the company’s decision to expand from gold mining to PGM mining in 2017.

“The U.S. PGM operations delivered another robust and improved financial result and continued to provide valuable diversification benefits for the group,” said Froneman during an international conference call last Thursday morning.

Froneman also commented on the difficult year the company experienced in South Africa in 2018, saying the future is once again bright.

“Over the last 18 months, the group has been confronted with a series of unprecedented challenges. We have successfully navigated our way through this challenging period and I am confident that we have emerged in a stronger position,” said Froneman.

HICCUP IN THE BLITZ PROJECT

While the mines and the smelter put up big numbers, a snag was hit on the Blitz Project.

“Challenging ground conditions” on the project prompted a slowdown, which led directly to a “productivity problem,” Froneman said during last Thursday’s conference call. Specifically, falling rock has forced workers to stop “breaking rock” and instead, install 20-foot cable anchors and shotcreting in an effort to prevent rock from falling and injuring workers. Froneman told the News there have been no injuries caused by the falling rock. Currently, the reinforcement of the rock walls is being done by miners. The company will soon have more technical equipment to make the work easier, but it remains a manual labor job. The purchase of more equipment to address the issue has added to operating costs.

Despite the project’s delayed progress, the Blitz project remains on track overall.

Stillwater produces approximately 330,000 ounces of PGMs every year. Once the Blitz Project is complete in 2022, that expansion is expected to produce 300,000 ounces of PGM yearly.

The East Boulder site located in Sweet Grass County produces approximately 230,000 ounces of PGMs every year. The Fill the Mill Project is expected to produce 45,000 ounces by 2021, and do so for a 10-year period.

As of Dec. 31, 2018, the PGM operations between the two mines had 25.6 million ounces of proven and probable PGM mineral reserves and 79.9 million ounces of PGM mineral resources, according to the company. The life of the Stillwater site in Nye is listed at 2044 and the East Boulder site will be in operation until 2056.

By 2022, the company expects to employ approximately 2,000 people in its Montana sites.

DIRECT ECONOMIC IMPACTS

The Montana mines employs approximately 1,600 people in a 7-county area with high-paying jobs. According to an independent study conducted by the Bureau of Business and Economic Research at the University of Montana, Sibanye-Stillwater’s direct financial contribution is as follows:

•Payroll: $182.8 million

•Total Taxes Paid: $16.5 million

•Property Taxes: $4.69 million

•Metal Mines Gross Proceeds Tax: $5.6 million

•Metal Mines License Tax: $6.2 million

•In Stillwater and Sweet Grass counties: Approximately $4.7 million per county per year

•Total Purchases: $441.7 million

•Goods/services in Montana: $112.2 million

•Goods/services out of state: $329.4 million

•Total Employee Taxes: $44.5 million

A MOMENT WITH THE BOSS

Tucked away in a conference room off of a busy Pike Avenue in Columbus last Thursday afternoon, Froneman took a brief respite from what had already been a long day.

The South African arose at 4 a.m. to finish prepping for what turned out to be a nearly 2-hour long international web conference call on the company’s results for the first half of 2019. Nearly half of that time was filled with questions from representatives of Bloomberg, Gramercy, Bank of America Merrill Lynch, RBC Capital Markets and HSBC. Such is the life for the head of a company that runs six gold mines and five PGM sites (Platinum Group Metals) in South Africa, plus two PGM mines and a smelter in Montana.

When Froneman and Sibanye-Stillwater Vice President of Legal, Environmental and Government Affairs Heather McDowell rolled into Columbus a bit after 3 p.m., it was for a brief stop — one more media interview and a few minutes to catch his breath before heading to the Beartooth Christian Ranch for the Neighborhood Gathering event, hosted by the Stillwater Protective Association, Stillwater Valley Watershed Council and Sibanye-Stillwater.

Despite a myriad of in-depth topics discussed at the morning web conference call (along with a 35-page power point presentation), Froneman easily recalled a handful of issues and expanded on them further for the News.

In short, the Montana mine sites have — and are expected to continue to — serve as both a financial and mental buoy following what can only be described as a difficult 2018 at the company’s non-U.S. sites.

Specifically, an unprecedented 21 fatalities at Sibanye-Stillwater South African mine sites, as well as a 5-month long strike at one gold mine.

In contrast, the Stillwater and East Boulder mines have not had a fatality since October 2011, which translates into 2.4 million fatality-free shifts. Contract negotiations have been uneventful since Sibanye-Stillwater purchased the Stillwater Mining Co., in 2017.

“They (the Nye and the East Boulder mines) are the crowning jewel of the company,” said Froneman, noting that last year, the Montana mines accounted for 49 percent of the entire company’s profit.

A WORLD LEADER

Sibanye-Stillwater doesn’t do anything small. It is currently the world’s largest primary producer of platinum, the second largest producer of palladium, the third largest producer of gold (on a gold-equivalent basis). The company is also the leading global recycler of spent PGM catalytic converter materials — done primarily at the smelter facility in Columbus.

When Sibanye bought the Stillwater Mining Company in August of 2017, it added Stillwater to its name, officially becoming Sibanye-Stillwater.

Aside from performance and safety, mining responsibly and treating people fairly are high on the company’s priority list. One change that has been made under Froneman’s charge is a focus on something he calls recognizing the importance of “all stakeholders,” as opposed to just shareholders. That, says Froneman, is key to the successful sustainability of the company. Stakeholders include employees, customers and the communities in which mines operate. Froneman has previously pointed toward the Good Neighbor Agreement as being a world-class example of this and he is currently implementing similar agreements at South African sites.

Last month, 181 CEOs of the Business Round Table in the U.S. released a statement that mirrors that approach regarding the “Purpose of a Corporation,” which includes not only shareholders, but also stockholders, which includes customers, employees, suppliers and local communities, according to a New York Times article and the Sibanye-Stillwater H1 Operating and Financial Results documents.

The Round Table is comprised of nearly 200 CEOs of major U.S. corporations.

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