Operating update for the quarter ended 31 March 2015
WESTONARIA 4 May 2015: Sibanye Gold Limited (“Sibanye”) (JSE: SGL & NYSE: SBGL) is pleased to provide an operating update for the March 2015 quarter. Detailed financial and operating results are provided on a six monthly basis i.e. at the end of June and December each year.
Statement by Neal Froneman, Chief Executive Officer Of Sibanye Gold
Overview and update
Group gold production of 9,808kg (315,300oz) for the March 2015 quarter was 5% lower than for the comparable period in 2014. The start-up of operations after the December holiday period was slower than normal, with gold production impacted by a number of operational events, which on an accumulated basis impacted negatively on gold production. The following operational events were amongst the most important:
- an underground fire at Kloof 7 Shaft;
- failure of a conveyor system at Kloof 8 Shaft that restricted delivery of underground ore;
- production disruption resulting from inter-union conflict at Beatrix;
- a series of plant incidents that disrupted processing operations and resulted in higher than desired stockpiles of reef at quarter end;
- electrical load curtailment as required by Eskom due to shortfalls in availability of national generating capacity that mainly affected processing of surface sources; and
- re-stocking of the production pipeline from face to smelthouse following more aggressive than usual accumulation clean-up prior to the Christmas break.
The operational disruptions were primarily a factor during January and February, with the operational performance improving significantly during March. Opportunities to enhance productivity and recover gold production lost during January and February have been identified and have been implemented at all of the operations. As such, the annual production forecast for 2015 remains unchanged. As a result of the lower production during the quarter, group Total cash cost and All-in cost for the quarter compared with the March 2014 quarter increased to R384,839/kg (US$1,023/oz) and to R473,573/kg (US1,259/oz) respectively.
Combined gold production from the Beatrix, Driefontein and Kloof operations was 18% lower than in 2014, at 8,438kg (271,300oz). Combined Total cash cost and All-in cost for the Beatrix, Driefontein and Kloof operations were also higher as a result of the lower production, at R368,559/kg (US$980/oz) and R451,801/kg (US$1,201/oz) respectively. The Cooke Operation was also affected by the slow start up post the December break but produced marginally more gold than in the same period last year. This is despite Cooke 4 still being in the build-up phase post the Section 189 process. Cooke produced 1,370kg (44,000oz) of gold at Total cash cost of R485,109/kg (US$1,290/oz) and All-in cost of R564,964/kg (US$1,502/oz).
Gold production from the surface operations was 40% higher year-on-year at 1,261kg (40,500oz), with the Cooke surface operations contributing 265kg (8,400oz).
It is pleasing to note the meaningful improvement in safety across the Group. The March 2015 quarter represents the first fatality free quarter for Sibanye. This compares with two fatalities during the March 2014 quarter. Cooke in particular has benefited from the implementation of Sibanye’s safety protocols and procedures, reporting its first fatality free quarter. The Driefontein and Kloof operations have both now recorded three consecutive fatal free quarters, again a first ever for these operations on a combined basis. The Sibanye team is committed to our zero harm target which will remain a priority and a key focus area.
Wage negotiations with organised labour will begin during the June 2015 quarter. Sibanye, along with other major South African gold producers will negotiate collectively under the auspices of the Chamber of Mines.
The gold industry plays an important role in South Africa by: making a significant contribution to the fiscus through tax and royalty payments; providing much needed employment; supporting a significant supplier industry; contributing to the development and upliftment of communities and investing significant capital in the country. The sustainability of the gold industry is therefore critical if the Government’s developmental goals and stakeholder needs are to be met.
Many gold mines are marginal and inflated wage and benefits increases will significantly impact on the sustainability of the industry and, while delivering short term gains for employees and unions, it will inevitably result in the loss of jobs and destroy value for all stakeholders in the longer term.
The gold industry is cognizant of the social and economic issues affecting its employees and the communities close to its operations and will approach the negotiations in a balanced manner ensuring that any agreements are in the interests of all stakeholders and do not compromise the long term sustainability of the industry.
Progress in the March 2015 quarter on the Group organic growth projects was as follows:
- The Kloof 4 Shaft and Driefontein 5 Shaft below infrastructure projects: The pre-feasibility studies for both projects, were completed in December 2014, both delivering higher forecast returns than the Group’s internal investment hurdle rates. The projects added approximately 1.1Moz to the Driefontein and 0.5Moz to the Kloof gold Mineral Reserves (refer to the company’s website www.sibanyegold.co.za for further details pertaining to the company’s Mineral Resources and Mineral Reserves). Detailed feasibility studies for both projects remain on schedule for completion during the June 2015 quarter and, due to the favourable forecast returns, initial preparatory project site preparation and development commenced at Kloof 4 Shaft in January, with the Driefontein 5 Shaft project preparation planned to commence in July.
- The West Rand Tailing Retreatment Project (WRTRP): A detailed feasibility study considering a phased development approach for the WRTRP was completed at the end of the March 2015 quarter and is currently undergoing an internal technical and financial review. This study has incorporated the use of available surface infrastructure to reduce upfront capital and enhance value. The infrastructure utilised includes existing gold plants and elution capacity at Driefontein and Kloof, as well as uranium processing capacity at the Ezulwini metallurgical complex. Metallurgical test work undertaken during the study has further enabled refinements to the process design, resulting in reduced capital and operating costs. The outcome of the study will be released during the June 2015 quarter.
- The Burnstone project: Capital expenditure of R286 million was approved in July 2014 for a 15 month construction programme to complete critical pumping infrastructure and re-align the shaft steelwork; including the installation of shaft service pipes and cables critical in support of the mine build-up strategy. Working capital was included for this construction period. The infrastructure project is on schedule for completion by the end of September 2015 as originally planned and is forecast to be completed within budget. The feasibility study and development of the life of mine plan is on schedule for completion in the June quarter. R150 million has been provisionally approved to commence mine development in 2015 with 2,000 metres planned to be developed into the initial targeted mining areas by the end of 2015. During February, the development commenced with a total of 192 metres completed for the quarter.
- The Beatrix West Section, Beisa project: A pre-feasibility study on this gold and uranium resource was completed in December 2014. Various regulatory approvals and permits are required before this project can be advanced and this work will commence in the June quarter and continue through 2016. Optimisation of the pre-feasibility study will continue in parallel with the permitting process.
- The Wits Gold Southern Free State Resources and Reserves, DBM and Bloemhoek projects: The DBM project review will commence in the June quarter. In addition to a technical review synergistic opportunities with the adjacent Beatrix operations will also be considered. The Bloemhoek project is to be reviewed for the medium term life extension opportunities for the Beatrix North Shaft mine life with a potential below infrastructure depth extension project into the Bloemhoek resource.
Forecast production for the year ending 31 December 2015 remains unchanged at between 50,000kg and 52,000kg (1.61Moz and 1.67Moz). Total cash cost is forecast at between R305,000/kg (US$850/oz) and R315,000/kg (US$875/oz)). All-in sustaining cost is forecast to be between R380,000/kg (US$1,055/oz) and R395,000/kg (US$1,100/oz), with All-in cost forecast to be between R385,000/kg (US$1,070/oz) and R400,000/kg (US$1,110/oz).
4 May 2015 N. Froneman Chief Executive Officer
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FORWARD LOOKING STATEMENTS
Certain statements in this document constitute “forward looking statements” within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934.
These forward-looking statements, including, among others, those relating to Sibanye’s future business prospects, revenues and income, wherever they may occur in this document and the exhibits to this document, are necessarily estimates reflecting the best judgment of the senior management of Sibanye and involve a number of known and unknown risks and uncertainties that could cause actual results, performance or achievements of the Group to differ materially from those suggested by the forward-looking statements. As a consequence, these forward looking statements should be considered in light of various important factors, including those set forth in this document. Important factors that could cause the actual results to differ materially from estimates or projections contained in the forward looking statements include without limitation: economic, business, political and social conditions in South Africa and elsewhere; changes in assumptions underlying Sibanye’s estimation of its current mineral reserves and resources; the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions as well as existing operations; the success of exploration and development activities; changes in the market price of gold and/or uranium; the occurrence of hazards associated with underground and surface gold and uranium mining; the occurrence of labour disruptions and industrial action; the availability, terms and deployment of capital or credit; changes in government regulations, particularly environmental regulations and new legislation affecting water, mining and mineral rights; the outcome and consequence of any potential or pending litigation or regulatory proceedings or other environmental, health and safety issues; power disruptions and cost increases; fluctuations in exchange rates, currency devaluations, inflation and other macro-economic factors; the occurrence of temporary stoppages of mines for safety incidents and unplanned maintenance reasons; Sibanye’s ability to hire and retain senior management or sufficient technically skilled employees, as well as its ability to attract sufficient historically disadvantaged South Africans representation in its management positions; failure of Sibanye’s information technology and communications systems; the adequacy of Sibanye’s insurance coverage; any social unrest, sickness or natural or man-made disaster at informal settlements in the vicinity of some of Sibanye’s operations; and the impact of HIV, tuberculosis and other contagious diseases. These forward looking statements speak only as of the date of this document.
The Group undertakes no obligation to update publicly or release any revisions to these forward looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.