Sibanye Gold reports significantly improved operating results for the June quarter
Westonaria, 6 August 2015: Sibanye Gold Limited (JSE: SGL & NYSE: SBGL) reported a significantly improved operating result for the June 2015 quarter, compared with the March 2015 quarter. Gold production increased by 26% quarter-on-quarter as grades recovered to more normal levels. Costs for the June quarter were accordingly between 12 and 13% lower than for the March quarter. Operating profit more than doubled from R744 million for the March quarter, to R1.6 billion for the June quarter.
Salient features for the six months ended 30 June 2015
- Gold production of 22,204kg (713,900oz) reflects a strong June quarter recovery
- June quarter All-in sustaining cost of R409,027/kg (US$1,054/oz), 6% lower than for the full six month period
- Operating profit increased from R744 million in the March quarter to R1.62 billion in the June quarter
- Annual production and cost guidance maintained
- Interim Dividend of 10 cents per share (ZAR) declared payable on 7 September 2015
- Net debt to EBITDA undemanding at 0.26 times
- Gold Reserves at the operations increased by 12% to 19.9Moz as at 31 December 2014
“The operational events which negatively affected production during the first two months of the year were largely resolved by the end of March and the operational performance for the June quarter was a better representation of normal performance” said Neal Froneman, CEO of Sibanye, “the strong recovery during the June quarter, suggests that the operational results for the second half of the year will be significantly better than those for the first half. As such, we have left our forecast for the year unchanged”.
Group gold production for the six months ended 30 June 2015 of 22,204kg (713,900oz), was marginally higher than for the comparable period in 2014. All in sustaining costs (AISC) of US$1,137/oz were slightly higher than the forecast average for the year, primarily due to the lower production in the March 2015 quarter. The 12.3% annual increase in electricity costs in April also contributed to higher costs. Operating profit for the period was R2.4 billion.
Load shedding by ESKOM resulted in approximately 270kg less production during the period, equivalent to approximately R125 million in lost revenue. The deterioration in the security of electricity supply, coupled with strong indications that the Eskom tariff trajectory is likely to exceed earlier projections, has further strengthened the business case for the independent photovoltaic electricity supply that Sibanye is developing and announced in February 2015. An environmental impact assessment study has been launched and an accredited independent consultant appointed to drive the process and arrangements are being put in place to have high level engineering design work completed during 2015. The target date for first generation from the envisaged 150MW plant is towards the end of 2017.
Earnings were severely affected by low production for the March quarter, with earnings per share further impacted by an 18% year-on-year increase in the weighted average number of shares in issue following the acquisition of the Cooke underground and surface operations. Basic earnings per share, Headline earnings per share and Normalised earnings per share were 20 cents, 19 cents and 27 cents respectively.
An interim dividend of 10 cents per share, equivalent to 35% of Normalised earnings for the period and at the upper end of Sibanye’s dividend payout range, was declared.
The Group reported significant progress on its projects, three of which have exceeded internal investment criteria and have now been included in Reserves, thereby enhancing and extending the Group Life of Mine production profile. These projects include below infrastructure projects at the Kloof and Driefontein operations, and the significant West Rand Tailings Retreatment project, the economic viability of which has substantially increased due to the addition of the Cooke tailings resources.
“We concluded the internal technical and financial review of the feasibility of the WRTRP during the June 2015 quarter, which confirmed the robust economic viability of this project” Froneman said, “We have now decided to include the uranium module as part of the initial execution phase and simultaneously process Cooke’s relatively high grade uranium surface resources with Driefontein’s high gold grade surface resources. This phase covers the majority of the total required project capital and has an IRR of over 15% and a payback of 9 years”.
“Processing the remaining Sibanye surface resources, selling by-product sulphuric acid and possible taxation benefits relating to capital expenditure offsets at Driefontein and Kloof, conservatively delivers an NPV of between R5.5 billion to R6.0 billion,” added Froneman.
The permitting process for the WRTRP has been initiated. During the estimated 300 day regulatory period various funding options which may further enhance project equity returns and ameliorate funding risks will be evaluated.
James Wellsted Sibanye Gold Limited +27 83 453 4014 firstname.lastname@example.org