Sibanye Gold reports robust operating and financial results
Westonaria, 31 July 2014: Sibanye Gold Limited (JSE: SGL & NYSE: SBGL) reported solid operating and financial results for the six months ended 30 June 2014 with production increasing 8% year-on-year and costs declining in real terms. Despite a 2% year-on-year decline in the average gold price received to R443,865/kg (US$1,293/oz), operating and All-in cost margins have remained steady at 35% and 17% respectively with cash generated by operating activities increasing marginally to R3,886 million (US$364 million).
Salient features for the six months ended 30 June 2014*
- An interim dividend of 50 SA cents per share declared.
- Operating profit increased by 4% to R3.5 billion (US$327 million).
- Gold produced increased by 8% to 22,143kg (711,900oz).
- Operating cost declined by 10% to R815/ton.
- All-in cost of R367,601/kg (US$1,071/oz) and Total cash cost of R291,212/kg (US$848/oz), in line with forecasts.
- All-in cost margin was unchanged at 17% despite a 2% lower gold price.
- The Cooke Operations made a positive contribution to operating profits and operating cash flow after capex in the first month of incorporation.
- Gold Reserves and Uranium Reserves increased by 66% to 32.7Moz and 139% to 102.8Mlb respectively.
* All comparisons made are relative to the corresponding period in 2013Consistent with its strategy of rewarding shareholders with industry benchmark dividends, the Group declared an interim dividend of 50 cents per share equivalent to 42% of normalised earnings. The comparable dividend declared in 2013 was 37 cents per share. Commenting on the dividend, Neal Froneman, CEO of Sibanye said: ”the dividend is above the 25% to 35% range defined in Sibanye’s dividend policy, and was declared by the Board in order to ensure that shareholders would not be compromised by the new shares issued towards the end of the period, as consideration for the acquisition of the Cooke Operations, with the Cooke Operations only contributing to the Group operating and financial results for one month. This decision also reflects the Board’s confidence in the outlook for the Group in 2014.” Production for the gold mining industry in South Africa during the first six months of the calendar year is seasonally weak due to the cessation of mining over the Christmas/New Year period and the Easter public holidays. It is therefore more relevant to compare the operating and financial results for the six months ended 30 June 2014 with the corresponding period in the previous year, rather than the preceding six months ended 31 December 2013. Sibanye concluded the acquisition of the Cooke Operations on 15 May 2014 and Group’s operating and financial results reflect only one month’s contribution from the Cooke Operations. Group gold production increased by 8% to 22,143kg (711,900oz) in the six months ended 30 June 2014, compared corresponding period in 2013. Total cash cost and All-in cost were in line with forecast, with Total cash cost of R291,212/kg (US$848/oz) flat year-on-year and All-in cost 2% lower at R367,601/kg (US$1,071/oz). Net operating profit increased 41% to R2,000 million from R1,977 million for the six months ended 30 June 2013. In the first month of incorporation into the Group, the Cooke Operations contributed R39 million to Group operating profit and broke even in terms of net profit. Importantly, the Cooke Operations have recovered from a difficult March quarter and made a marginal contribution to Group operating cash flow after capex in June 2014. Normalised earnings (defined as basic earnings excluding gains and losses on foreign exchange and financial instruments, non-recurring items and share of result of associates after taxation) of R1,065 million for the six months ended 30 June 2014 were in line with R1,075 million normalized earnings for the corresponding period in 2013. A 36% year-on-year increase in the weighted average number of shares in issue, predominantly due to the low number of shares in issue prior to its listing in mid February 2013, distorted the average weighted number of shares in issue for the first half of 2013, resulting in a 27% decline in normalised earnings per share to 138 cents per share from 190 cents per share for the six months ended 30 June 2013. Basic earnings of R533 million were 83% higher year-on-year, despite the impact of inter alia, non-recurring items including a R150 million loss and R120 million impairment of Sibanye’s 33.1% investment in Rand Refinery Proprietary Limited (“Rand Refinery”), as a result of Rand Refinery’s inability thus far, to reconcile its actual gold inventory against its accounting records, following the implementation of a new Enterprise Resource Planning (“ERP”) system in 2013. Other items impacting basic earnings included restructuring costs, transaction related costs and an increase in share based payments resulting from the substantial increase in Sibanye’s share price between the reporting periods. The group also announced that it had introduced a new function dedicated to the development of safe technology, enhancing safety and productivity in the medium to long term and a series of executive management changes to support the new function, ensure continuity at the operations and support its strategic vision. “The continued profitability and sustainability of our operations over the long term is central to the delivery of our vision. We have recognised the need for a focused programme to ensure the safety of our employees and delivery on our production targets and have therefore introduced this Safe Technology function, which will be led on a focused and dedicated basis, by Peter Turner, previously Chief Operating Officer of Sibanye.” ”I am confident that this focus will result in a safer and more productive operating environment being provided for our employees in future”, concluded Froneman.