By Helen Reid
JOHANNESBURG (Reuters) - Disruptions to automotive supply chains in the wake of Russia's invasion of Ukraine could impact demand for platinum group metals (PGMs), the chief executive of South African miner Sibanye-Stillwater said on Thursday.
CEO Neal Froneman said supply chain disruptions were his biggest concern as carmakers - key consumers of PGMs - warned they were struggling to obtain crucial wire harnesses normally produced in western Ukraine.
"In my mind the supply disruptions and the impact on demand have got more downside than supply reorganisation," Froneman said.
Fears of a palladium shortage due to sanctions on Russia sent prices of the metal to a seven-month high, but Froneman expected the price volatility to ease as Russian metals find different markets.
"I think their (Russia's) supply will move to friendly countries and the Western world will take up the slack that goes elsewhere," he said.
More of Sibanye's PGM production may be sold into Europe as countries there switch away from Russian metals, he added.
Sibanye reported a record annual profit as commodity prices surged. Profit rose by 13% in 2021 to 33.1 billion rand ($2.16 billion) but inflation was a key concern. Sibanye's Johannesburg-listed shares were down 1.9% at 1100 GMT.
Sibanye's PGM operations in the United States saw all-in sustaining costs jump by 15% to $1,004 per ounce, as a skills shortage in Montana and high employee attrition rates drove the miner to rely more on higher-cost contract labour.
"We have to change our approach to our expansion plans at Stillwater in the U.S. with a view to making our operations work with the labour that we've got," Froneman said in an interview.
He said the company would produce revised plans within a few months.
Asked if that might mean slowing down the expansion, he said: "Absolutely - if there's a shortage of capacity to fill those positions there's no point in driving up your cost and extracting the resource in a sub-optimal way."
In its South Africa operations, costs at Sibanye's gold operations climbed by 7%, which the company attributed to above-inflation increases in the cost of electricity and some consumables.
Production at Sibanye's South African PGM operations jumped to 1.9 million ounces, while all-in sustaining costs fell by 5% thanks to synergies from mines being near one another, the company said.
"The higher production has offset the strong inflationary pressures that have impacted the mining sector in general in the SA operations," Investec analyst Nkateko Mathonsi said in a note.
Sibanye said its South African PGM mines would produce between 1.75 million and 1.85 million ounces in 2022, while its South African gold mines would produce between 813,000 and 873,000 ounces.
Sibanye, which faces a compensation claim after walking away from a $1.2 billion acquisition of two mines in Brazil, has not raised a provision in relation to the claim, chief financial officer Charl Suyter said.
Froneman expressed confidence regarding Sibanye's position in the legal dispute. After a ballot report showed members of the National Union of Mineworkers (NUM) and UASA unions overall backed a strike at Sibanye's South African gold operations, Froneman said the company would continue to try and avoid a strike, but would not revise its wage offer.
The total vote tally was 8,224 - just over a quarter of Sibanye's 31,000 employees in its gold division.
Froneman said the Association of Mineworkers and Construction Union (AMCU) also voted for a strike, though the CCMA ballot did not mention AMCU.
AMCU head Joseph Mathunjwa did not immediately reply to a request for comment.
The Solidarity union split from the other three unions on Wednesday by saying it had accepted Sibanye's final wage offer of a 5% annual pay increase.
($1 = 15.3245 rand)