Trading statement and operational update for the quarter ended 30 September 2015
WESTONARIA 29 October 2015: Sibanye Gold Limited (“Sibanye” or the “Group”) (JSE: SGL & NYSE: SBGL) is pleased to present a trading statement and operational update for the quarter ended 30 September 2015. Detailed financial and operating results are provided on a six-monthly basis i.e. at the end of June and December.
Shareholders are advised that Sibanye has a reasonable amount of certainty that its earnings per share (2014: 186 cents per share) and headline earnings per share (2014: 170 cents per share) for the year ending 31 December 2015 to be more than 20% (149 cents per share or 136 cents per share respectively) lower than for the corresponding period in 2014, as previously reported. The financial information on which this trading statement is based has not been reviewed or reported on by Sibanye’s auditors. A further trading statement with a more definitive range will be released in due course.
STATEMENT BY NEAL FRONEMAN, CHIEF EXECUTIVE OFFICER OF SIBANYE GOLD
Overview and update for the quarter ended 30 September 2015 compared with the quarter ended 30 September 2014
Sibanye’s gold operations have largely recovered from the operational challenges experienced during the March 2015 quarter. Production from the Beatrix and Cooke Operations improved significantly relative to production for the comparable period in 2014, driven largely by a planned increase in volumes mined and milled. Gold production from the surface operations increased by 13%, driven primarily by new sources of higher grade material and higher volumes processed at Driefontein. Two fires at Kloof hampered the removal of high grade ore from underground however, resulting in a lower mine call factor (“MCF”) and a 17% decline in the underground yield, with production at Driefontein impacted by seismicity and illegal industrial action during the quarter. As a result, Group gold production of 12,772kg (410,600oz) for the September 2015 quarter was 3% lower than for the comparable period in 2014, but 3% higher than that achieved in the June 2015 quarter.
The average rand gold price received for the September 2015 quarter increased by 6% to R470,349/kg due to a 21% depreciation of the rand against the US dollar year-on-year, to an average of R13.00/US$ for the September 2015 quarter. This was despite a 12% year-on-year decline in the average dollar gold price to US$1,126/oz. Healthy margins were maintained, notwithstanding the impact of higher electricity tariffs, resulting in above inflation electricity costs, and provisions for the increased wages. Operating profit for the period amounted to R1.6 billion (US$124 million).
Total cash cost of R348,857/kg and the All-in sustaining cost (“AISC”)of R420,811/kg increased by 11% and 9%, respectively, but in dollar terms remained globally competitive, with Total cash cost 8% lower at US$835/oz and AISC 10% lower at US$1,007/oz.
Capital expenditure of R873 million (US$67 million) was 4% higher than for the September 2014 quarter. The increase was due to increased ore reserve development (“ORD”) and project capital expenditure, mainly at Burnstone. This was partly offset by sustaining capex at Driefontein and Kloof, reducing predominantly due to the completion of the CIL tank refurbishment at Driefontein (R46 million) and other upgrades (R21 million), which reached completion during 2014.
On a progressive basis for 2015, the Fatal Injury Frequency Rate (“FIFR”) declined to 0.06 (per million man hours worked), a 54% improvement compared with the same period in 2014 and the best safety performance ever produced by these assets. The FIFR for the September quarter improved further to 0.04, but reflected a regrettable fatality which occurred at the Kloof operation during August. The Sibanye board extends its deepest condolences to the family and colleagues of Sejakgomo Mokhali. Management remains determined and committed to its zero harm policy. It was pleasing to note that Sibanye as a group achieved one million fatality free shifts on 19 September 2015 and two million fatality free shifts on 27 October 2015.
On 22 October 2015, Sibanye signed a three year wage agreement with the National Union of Mineworkers (“NUM”), UASA and Solidarity. The offer by Sibanye was originally conditional on acceptance by all unions, however, the Association of Mineworkers and Construction Union (“AMCU”) rejected, and continued to reject, all offers made. Many of our employees were in favour of accepting the offer and in order not to prejudice them, or those employees belonging to NUM, UASA and Solidarity a decision was taken to implement the wage agreement to all employees in the bargaining unit at Sibanye. The offer was one that can ensure sustainable operations without putting jobs at risk. No other agreement will now be considered. The basic terms of the agreement are as follows:
- Category 4-8 employees and B-lower officials will receive an increase of R675 per month in year 1, R700 per month in year 2 and R725 per month in year 3, as well as a R100 per month increase in living-out allowance in year 1. This represents an increase of 12% in year 1, 11% in year 2 and 10% in year 3.
- Miners, Artisans and Officials, an increase of 6% on standard rate of pay in year 1, and 6% or CPI (whichever is the greater) in years 2 and 3.
Further detail on the wage agreements is available at: www.goldwagenegotiations.co.za.
We have previously indicated our intent to pursue acquisitions in the Platinum sector in South Africa and during the quarter a number of significant strategic acquisitions were announced, which will enhance our ability to pay shareholders sustainable, industry leading dividends, and consistent with our vision, will ensure that we continue to create superior value for all of our stakeholders.
On 9 September 2015, we announced that an agreement had been reached with Anglo American Platinum to acquire its Rustenburg operations. The Rustenburg operations offer an attractively priced and defensively structured entry into the PGM sector and significant leverage to the price cycle. The location of the Rustenburg operations in the middle of the western limb of the bushveld complex, offers significant strategic options for the realisation of value with neighboring operations. On 6 October 2015 a bid to acquire Aquarius Platinum, a low cost producer adjacent to the Rustenburg operations and with a joint venture operation in Zimbabwe, was announced. The Aquarius board accepted the cash offer and has recommended it to its shareholders. The successful conclusion of both of these transactions would consolidated Sibanye’s position as the world’s fifth largest global PGM producer and allow significant synergies between the Rustenburg operations and Aquarius’ Kroondal mine to be realised. Cost and production synergies with an estimated value of around R800 million per annum are likely to be realised within four years of concluding the transactions. Both of these acquisitions are subject to shareholder and regulatory approvals.
Both of these acquisitions are expected to be completed during 2016, for more detail refer our website – www.sibanyegold.co.za.
Despite the solid and continuing operational recovery after the March 2015 quarter, particularly at Beatrix and Cooke, various operational disruptions and distractions related to the on-going wage negotiations have continued to impede a full recovery at Kloof, and to a lesser extent, Driefontein. Operating trends continued to improve during the September 2015 quarter, but even with a further forecast improvement for the December 2015 quarter, it is unlikely that we will claw back production that was lost during the March 2015 quarter. As such, we are downgrading guidance for the year.
Gold production is forecast to be between 4% and 6% lower than original guidance. Guidance is now between 47 tons (1.51 Moz) and 48 tons (1.54 Moz). At these production levels, Total cash cost is forecast at between R350,000/kg and R360,000/kg and AISC at between R425,000/kg and R435,000/kg. Costs in dollar terms remain largely unchanged due to the weaker rand/dollar exchange rate which is forecast at an average R12.50/US$ for 2015. Total cash cost is forecast at between US$870/oz and US$895/oz and AISC between US$1,060/oz and US$1,085/oz.
29 October 2015
Chief Executive Officer