Reviewed provisional condensed consolidated results for the year ended 31 December 2012
On 1 March 2013, Sibanye Gold Limited (JSE: SGL, NYSE: SBGL) announced net earnings for the year ended 31 December 2012 of R2,980 million (US$364 million). This represents a 16 per cent increase in net earnings compared to the equivalent period in 2011. As a result of material production disruptions in the latter half of the year, 85 per cent of the net earnings were generated in the first half of the year. Net earnings for the six-month period ended 30 June 2012 was R2,525 million (US$308 million) and for the six-month period ended 31 December 2012, R455 million (US$56 million). The provisional condensed consolidated financial statements are identical to the preliminary condensed financial statements published on 1 March 2013.
In the 2012 financial year, the Group produced 38,059 kilograms (1.22 million ounces) of gold compared with 45,005 kilograms (1.45 million ounces) in the 2011 financial year. The 15 per cent production decline was mainly due to illegal industrial action, which resulted in up to six weeks of lost production and a fire at the Kloof-Driefontein Complex (“KDC”) Ya Rona shaft. As a result KDC and Beatrix produced 165,200 ounces and 58,100 ounces less respectively, than in the equivalent period in 2011.
The Group reported gold reserves of 13.5 million ounces as of 31 December 2012 and resources of 74.3 million ounces.
Shareholders are referred to the Gold Fields Limited (“Gold Fields”) quarter and year ended 31 December 2012 Reviewed Preliminary Condensed Consolidated Results dated 14 February 2013 for detail on the operational and financial results of KDC and Beatrix.
Statement by Neal Froneman, CEO of Sibanye Gold
The provisional condensed consolidated financial information for the year ended 31 December 2012, as reported, signals the last period that Sibanye Gold’s operations were operated and managed by Gold Fields. In future, the results will reflect the impact of Sibanye Gold’s strategic initiatives, broadly outlined below. Sibanye Gold’s strategy is focused on what we believe investors require from a gold equity investment. As such, Sibanye Gold has identified the following key strategic drivers and investment criteria:
- Leverage to the gold price by remaining unhedged and including operating strategies which ensure that gold price increases flow through to the bottom line;
- Optimising free cash flow (after all costs, capital expenditure and taxes) and using this as the key performance measure;
- Maintaining capital expedience and discipline – ensuring that capital spent generates the appropriate returns and that the balance sheet is optimally geared;
- Not pursuing growth for the sake of size, but only if that growth enhances cash flow and returns measured as earnings per share; and
- Rewarding shareholders by means of regular and meaningful dividends.
The KDC and Beatrix mines, despite having been in production for many years, remain high quality, long life assets as evidenced by the current reserve and resource base of 13.5 million and 74.3 million ounces, respectively. This reserve excludes a significant surface tailings resource of 2.9 million ounces, which is currently the subject of a pre-feasibility study. Importantly, 22.3 million ounces is a measured resource with an average grade of 11.9 grams per ton, reflecting the high quality of the underlying assets.
The substantial and high quality resource and reserve base provides the opportunity to address the historical and projected declining production profiles.
The operating strategy is focused on reducing costs with a view to reducing mining paylimits which is necessary to improve mining flexibility and extend the lives of the operations. Capital will only be allocated to projects that generate appropriate returns. As alluded to in the pre-listing statement, Sibanye Gold management believes that there is significant opportunity for operational improvement and in this regard has already initiated a detailed review of the entire business and previous Gold Fields initiatives. The results of this review will be incorporated in new plans and reported to the market within the next six months.
The 2012 financial results demonstrate the ability of the Sibanye Gold assets to generate significant amounts of free cash. These cash flows underpin the company’s intent and ability at current gold prices to return a meaningful amount of cash to our shareholders through dividends. Sibanye Gold has committed to a dividend policy, as outlined in the pre listing statement, which is based on 25 per cent to 35 per cent of normalized earnings which at current share prices will result in Sibanye Gold having one of the highest industry dividend yields globally. Where appropriate the company will also consider returning excess cash back to shareholders through the declaration of special dividends. Based on the nature of the underlying assets, it is the company’s intent to become a benchmark dividend payer.
1 March 2013 N. Froneman Chief Executive Officer