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Why Shares of Sibanye-Stillwater Jumped on Tuesday

Lou Whiteman, The Motley Fool

What happened

Shares of gold producer Sibanye-Stillwater (NYSE: SBGL) climbed nearly 10% on Tuesday afternoon after the company won court approval to proceed with its planned restructuring of two South African gold mines.

So what

Sibanye-Stillwater said in a statement that the South African Labour Court has dismissed an attempt by the Association of Mineworkers and Construction Union (AMCU) to halt the restructuring of its Driefontein and Beatrix gold mines.

Miners at work underground at Sibanye-Stillwater's Driefontein operations.

Miners at work at Sibanye-Stillwater's Driefontein operations. Image source: Sibanye-Stillwater.

The company, formed via a $2.2 billion merger between Sibanye Gold Ltd. (under which you might still see the company's name listed on some stock price services) and Stillwater Mining, is attempting to bring down the costs at mines that it says experienced financial losses in fiscal 2018. The restructuring could impact about 6,000 jobs.

The AMCU has been on strike at Sibanye-Stillwater since mid-November, and earlier this month its request to extend that work action into an industrywide strike against all producers was rejected by the Johannesburg Labor Court. Sibanye-Stillwater has countered that restructuring is needed if it is to remain competitive in the market, citing rising labor and electricity costs.

Now what

Sibanye-Stillwater CEO Neal Froneman, in a statement announcing the latest labor court decision, urged the union to work with management to "jointly devise viable alternative measures" and to "find ways to mitigate possible job losses at the operations." The union might be ready to talk, with reports out of South Africa indicating that it is close to a deal to end the strike.

Sibanye-Stillwater offers an intriguing mix of platinum and gold mining. But its high costs, operating issues, and the high debt load it is carrying as a result of the Sibanye/Stillwater merger are red flags. Tread carefully with this metals stock.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.