Sibanye suspends cash dividend as net debt hits R22bn

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Neal Froneman, CEO, Sibanye-Stillwater

TOILING under the weight of its $2.2bn takeover of Stillwater Mining earlier this year, Sibanye Gold suspended the cash dividend, electing instead to pay shares – a move that will divide shareholders depending on their view for the shares in the company, today rebranded Sibanye-Stillwater.

Net debt is now at $1.69bn or R22.1bn as of the close of the first half of its financial year on June 30. This equates to net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) of 2.6:1 – a level described by the group as “temporarily elevated”. It represents a more than 300% increase in net debt year-on-year, and is roughly 56% of Sibanye-Stillwater’s market capitalisation.

As a result, covenants with lenders on the Stillwater bridging facility have been increased to accommodate a net debt Ebitda ratio of 3.5:1. Sibanye said the ratio would peak at no more than 3:1 and that debt would be cut by two thirds as a ratio to Ebitda in about three to four years.

Analysts pondered the pros and cons of the cash dividend suspension. On the one hand, the move could be seen as a divergence from Sibanye’s original strategy; on the other, it could be argued that the stock has significant upside having been sold down 65% of its value in the past 12 months.

Said Goldman Sachs in a report: “Sibanye did not declare a cash dividend with these results. Instead it decided to issue two new shares for every 100 shares held. As of yesterday’s close this works out to be about R44/share or 4% annualized dividend yield”. It added that the capitalisation shares were dilutive.

“Reflecting higher leverage and negative $105m free cash flow during the period, Sibanye has not declared an interim dividend for the first time in its history,” said JP Morgan Cazenove analyst Dominic O’Kane in a report. He added that this was “prudent” and “unsurprising” given the company’s leverage.

Shares in Sibanye Gold were down 4% by midday on the Johannesburg Stock Exchange valuing the company at just under R40bn.

“We have done something quite different and unique. I know analysts will say it’s a zero sum game, but I am a shareholder and I welcome it,” said Sibanye-Stillwater CEO, Neal Froneman in a results presentation in Johannesburg.

Froneman insisted Sibanye-Stillwater had not amended its policy on paying dividends. “While we are deleveraging the balance sheet it is not appropriate to use cash to pay dividends,” he said. This could be the preferred shareholder return structure for the next six to 18 months, he suggested.

“It’s a chunky number compared to what we’re used to,” said Charl Keyter, Sibanye-Stillwater CFO who added that roughly 25% to 30% of the company’s debt reduction plans would be funded from pre0tax profits, and the balance from cash flow. “This is not based on hallelujah Ebitda growth,” he said.

MESSY

Analysts described the interim figures as “messy” given that they included two months of contribution from Stillwater’s operations as well as once-off items, including R2.8bn in impairments related to the proposed restructuring of the Cooke 1 to 3 shafts and Beatrix West. A R1.1bn provision has also been made for potential settlement of a silicosis suit.

The outcome was a headline earnings loss of R1.47 per share and a normalised earnings loss – which strips out the exceptional items – of 47 South African cents per share.

Operationally, the performance was mixed year-on-year.

Gold output was 8% lower at 689,000 ounces owing to volume and grade declines at Beatrix West and illegal mining at Cooke 1 – 3 shafts which Froneman described as “out of control”. Some 665 illegal miners have been arrested and a further 123 employees arrested and suspended for aiding and abetting the illegal miners, said Froneman.

“I really worry that regulators continue to suggest it [illegal mining] is artisanal and should be legalised without understanding difference between abandoned mines and infiltration of operating mines through collusion with employees,” he said.

As a result of the illegal mining and underperformance operationally, some 7,400 employees would be affected by restructuring at Cooke 1 – 3 and Beatrix West resulting in a downgrade in Sibanye-Stillwater’s full-year gold production guidance to between 1.35 million to 1.38 million oz from a previous base of about 1.6 million oz. The restructuring would cut all-in sustaining costs R25,000 per kilogram but cost about R1bn to conclude.

Analysts worry that Sibanye-Stillwater’s deleveraging aspirations could be impeded by further under-performance of the gold assets. The company’s cash flows “… remain heavily weighted to gold,” said Leon Esterhuizen, an analyst for Nedbank Securities. “We therefore need to see a sharp improvement in the gold operations to turn around the company’s fortunes and to generate the cash flows needed to reduce the debt load,” he said.

Froneman said he did not expect further restructuring, however. “The core assets of Kloof and Driefontein are running well,” he said. “We have not cut back on capital for ore reserve development, or maintenance, or the down dip extensions at Kloof and Driefontein. My view is that this is the base going forward,” he said of the new gold production target.

The performance of the platinum group metals (PGM) assets in South Africa and Stillwater in the US – which will be an important driver of Ebitda when its Blitz expansion project is delivered later this year – was excellent.

PGM output for the year has been increased to between 1.1 to 1.15 million oz from 1.05 to 1.1 million oz previously while annual cost savings from the quick-fire acquisition of Aquarius Platinum and the Rustenburg assets of Anglo American Platinum last year had already reached R550m and would exceed the original R800m target by R200m.

Froneman also disclosed that there was less likelihood of having to retire up to 300,000 oz in PGM production from South Africa as previously flagged. “We will make a final call in next few months,” he said. “As of now, the benefits of restructuring and the synergies may result in that we don’t have to close 300,000 oz in production,” he said.

13 COMMENTS

  1. Goldspeculator: I would love to see your comments on Sibanye.
    This is the company who almost guaranteed annual dividends.
    There gold mines are old and marginal at best, environmental liabilities must almost exceed value by now.
    The Platinum side is also no golden goose story. They bought a Pool and Share agreement when they bough Aquarius. No other assets in SA to speak from, only liabilities of mined out operations. Only value possible asset is the 50% share in Mimosa in Zim. In the Jean Nel era, Aquarius was well run and costs were kept relatively low. I doubt that the current Sibanye management can match that.
    The Rustenburg operations are no better. Anglo mined the good areas years ago and with Anglo still controlling the smelting facilities, Sibanye might have bought a dog here as well.
    Can it be that the so called, self proclaimed South African mining champion will jump ship eventually and lick its wounds in the stillwaters of America

    • Pete,
      I plead that we be a bit circumspect in our comments and criticism.

      I have made my “informed analysis” (LoL !!!) comments on SBGL already and the miningmx editor is to blame for the delay.

      There is absolutely nothing marginal about a u/g gold mine with 2P = 20Moz @ 6 g/t with unit costs of R2600/t. At current abhorrent costs, this implies Operating Margin = ± 35% at 1,7Moz/yr . Thats bound to be good money, more like ±R8-10Bn/yr IF SBGL MANAGEMENT WERE COMMITTED. The Enviro Liabilities are ONLY R3,2Bn , so thats peanuts compared to remaining LoM CF.

      I agree that the Pt assets are NOT gooses ( either golden Or Pgmed).You will have to trust me on this when i say that all thats required is a basket price = R15000/4Eoz, then you will see a different picture emerge from these assets. There is still plenty of PGMs ( >80Moz =R+R) to be mined there before we worry about enviro liabilities. I agree that the Aquarius deal was also a bit rich ( read overpaid by some $150M at the time), but its water under the bridge now so we need to make assets work. But the assets are starting to show their age and i would have rather preferred Lonmin assets. Kroondal mine is really not leaving up to its billing. SO ITS YET ANOTHER FRONEMAN CORPORATE MISTAKES/ACCIDENT AKIN TO URANIUM1/Aflease. I don’t believe Jean Nel did as well as you proclaim. Stuart Murray was a keyman behind AQR .

      The jury is still out on Rustenburg Pt assets , and i hope Froneman redeems himself from being seen as “someone prone to corporate M&A accidents”.

      But anyway I appreciate the bunter….

      • Goldspeculator is correct on Jean Nel.
        The rise of Jean Nel very much reminds me of the 1979 comedy-drama movie “Being There” starring Peter Sellers, a tale of a rise to power and influence of a man whose abilities were driven more by perception than by fact. An accountant with no knowledge of mining whose natural inclination is to dogmatically follow his own poorly constructed numbers on an Excel “model “ and close everything down to save costs and preserve cash was naturally suited to the market and situation facing Aquarius at the time. All he had to do was say no and close things down.
        Nel had also been remunerated in shares which he could not exit and he had absolutely no idea what to do with Aquarius next.
        He turned to his old colleague Froneman to bail him out by swapping his untradeable Aquarius shares for tradeable Sibanye stock and creating Aquarius a new story. Their relationship extends back to 1997 and the New Kleinfontein Mining Company fiasco, a saga well described in Noseweek of February 2016.
        Perhaps Nel’s true ability is more truly described in his role in the listing of Namakwa Diamonds Limited on the LSE in 2008 (now failed and delisted), in which more than $300 million was raised and squandered on thin marginal assets, questionable acquisitions, and a company in which large London investors indicate that there were absolutely NO financial controls. Total losses exceeded $400 million before the Company was taken private by a long suffering shareholder tired of losing their capital.
        Nel was a director and CFO of Namakwa Diamonds Limited. He has never had to answer for any of the squandered cash or failed company, but in an instant became a “platinum miner”.
        Bizarre. But sadly true.
        He was considered a candidate for CEO of Impala. Impala shareholders dodged a bullet there.
        The end game of all of these guys is to make money for themselves using OPM. Nothing more. And to be clear, there is nothing wrong with that. The operational performance of the Sibanye Gold Mines has been rescued by the weak rand, time and time again.
        Sooner or later, the luck will run out. And off the chaps will fly leaving the pile of debt and broken company for somebody else to fix.

  2. Dear Fellow Readers,

    My take on Sibanye (SBGL) results is as follows:

    OVERVIEW
    1. The results depict a weak ( deteriorated ) operational performance by the Gold Division. This division is a 48- 50 tons/yr latent production. Latent core ops refers to Kloof, Driefontein & Beatrix only. Now FY17 fcast = 42-43tons/yr????
    2. OCF has plummeted from R10Billion/yr to annualised R2,5Billion/yr , including Pt assets & Stillwater. What???? UNREAL!! With CAPEX = >R 4800M/yr bill to come…
    3. Operational discipline has slipped badly at SBGL and operational management changes are now required.
    4. The Pt assets financial performance deterioration has abated which is encouraging given the current PGM industry funk.

    ANALYSIS

    As always, we need to delve to asset level to identify attendant opportunities and challenges.
    1. GOLD DIVISION : Firstly, the removal of the Cooke Ops is a side show and they never made any contribution. Since acquisition in June 2014, these Ops have been cum.-ve CF = -R1750M. The deal was never justifiable given that the U3O8 market is also dead. The costs of this ill-fated adventure was R5,3Billion PLUS R1750M. UNBELIEVABLE MESS! The latent production of core SBGL is ± 50t/yr gold at the AISC= ±R450K/kg . Due to a managerial duty dereliction , now we are sitting with a FY17 Fcast = 42-43 t/yr @ AISC = R485 -495K/kg. There is absolutely nothing geological or otherwise unforeseen about the core ops of SBGL. The integrity of the assets is still there and thus i am miffed about their performance. It seems nobody is minding these cash cows anymore and everybody and sundry are looking to do a “Stillwater deal”. There is a need for operational management overall. There mines at current Au price = R550K/kg , should deliver OCF = R8Billion/yr or FCF = R4Billion/yr ( R8B – R4B(CAPEX)) . I am shocked that the CEO attension is diverted to capitalisation via more shares issuing than putting in the hardyards to effect operational turnaround of this division.

    2. Pt Division : At this point of the cycle, these operations must just “wash their own faces”, thus NOT be CF -ve. It seems we are getting there more so after the June qrt. The q/q ±14% decrease in TCC to R9647/4Eoz is encouraging in this stagnant R/4Eoz price of ±R12000/4Eoz. The Capex of now R400/quarter ( annualised = R1200M/yr) is improved on Deals Baseline of R2200M/yr for FY17. Mimosa requires attention since its unit costs have increased >24% q/q but it still covered its own capex.

    3. STILLWATER : SBGL overpaid for these assets by ± $750M . I truly believe this deal was unnecessary given that the SWL share price had increased by 330% in 2yrs preceding the deal. So the capitalisation shares issuing is part of the hangover after consummating such a deal. As aforementioned, the Gold division should be able to take such a debt load (R23B) if operational performance is improved given their EBITDA = R10B/yr potential at current prices. The assets performance in the hands of SBGL management will be key going forward. At EBITDA = $95M/yr , this deal will require the “Pt & Pd prices to go to the moon” for it to make a meaningful contribution to shareholder value for SBGL. $2650M deal for ±$95M/yr EBITDA is simply outrageous, unless its done to ensure that Froneman gets to spend more time in his boat in the US.

    CONCLUSIONS

    SBGL gold division requires a fresh set of eyes to get it back to respectable operational footing. With all respect to Robert, he is NOT an operational guy for this task. I am concerned about the capitalisation issue given the said operational weaknesses at the gold division. Surely, given that the rights were oversubscribed, why could they NOT have raised more then instead of now. Is it a case of mining the shareholders again given improved share price?

  3. Hey Goldspeculator! If you are so clever why not apply for a job with SGL? From your comments above it sounds like you want them to think they need your help? I think the past few months have seen tight margins on the gold side, not least because of a crap Rand/$ gold price. I’m sure dear Neal will demonstrate Stillwater will produce more than $95m/y, particularly with higher Pd prices. Funny how the market always seems to doubt Neal and then when he get’s it right they chase after him and cry when they do it ahead of a correction in the sector. Clever analysts like you never seem to learn. Charge high fees to manage other peoples money!

    • Follower ,

      Kindly note that I am NOT a paid analyst but a mere retail shareholder.

      I don’t aspire to work for any of the corporate mining companies including SBGL. Froneman has NEVER gotten anything right apart from East Modder Mine. Even that came in at significantly high CAPEX. Sure , he has a following and a name in the industry BUT thats always build on forward/anticipated performance yet to be delivered.

  4. To all those clever armchair critics out there…..From what I can see, Sibanye has significantly extended the operational lives of the gold mines which were in harvest, with a life of less than 10 years at a severely declining production rate, when unbundled out of Goldfields. Over the past six months all the local gold producers made losses due to the seriously volatile rand and currently low gold price while Sibanye has remained cash flow positive. Sibanye seems to be addressing the underperforming assets by closing the Beatrix 4 shaft and the Cooke operations (which made big losses during the period) allowing the remaining gold operations should be more profitable going forward. This has saved many thousands of jobs.

    On the platinum side, these are serious assets and not simply a non-event. Sibanye is already the fourth largest SA producer with these assets and has already produced synergies and cut costs by saving more than R550 million in 8 months with more to come. That they are already operating at breakeven shows the benefits of the Sibanye’s team collective pool of mining experience and understanding and consolidation. Remember Angloplat had thrown the towel in with these operations. Further consolidation in SA platinum, at the right time could result in greater benefits for the industry as a whole. It is easy to say Anglo blah blah blah, but they have a different approach and Sibanye has already stripped out overheads that Anglo couldn’t and the operating results from Aquarius have improved even after Jean Nel left.

    Stillwater may have seemed expensive when announced last year, but with palladium prices over US$250/oz higher than last year, and with production growing over 50% in the next few years, these assets will be generating serious amounts of cash in dollars – never mind the benefit of diversifying away from a seriously messed up environment in South Africa.

    Sibanye has grown from R10bn market cap to R46bn in five years and from the graph they showed yesterday most of their peers have more than halved in that time…hard to complain about that performance….unless you can do much better? There are a lot of clever people sitting around the outside giving opinions, if you are so good and know how to do it all, send your CV to the company and show them what you are capable of.

    Lastly, why bash Neal Froneman and a can do team that is at least trying and achieving something positive….in a difficult environment, commodity price wise and regulatory wise. Seriously….

    • Seriously,

      I hereby with to politely indicate that you have your facts wrong from the onset about the declining gold production profile of the core gold mines, kindly please refer to the listing documents. At SBGL listing , the R+R= 20Moz and production was FY14 = ±49000kg ; average FY11 – FY13 = ±45000kg/yr. So these assets were never ” were in harvest, with a life of less than 10 years at a severely declining production rate” , sure they had operational issues and were distracting GFI from South Deep. Please note that its these same assets which effectively funded some ± R30Billion of South Deep Mine and some other GFI acquisitions.

      I have always maintained that SBGL mines are better managed that most in RSA ( refer to my AGA mines comments). These mines exceed their break-even yield grade by > 2g/t due to stable R/t unit costs and ORD capex. At issue is that over the last 2-4 qrts , it seems production discipline has slipped . Beatrix yield grade has declined from 3,5 g/t to 2,5 g/t ( maybe geological) without an explanation. Driefontein which normally mines ±100K m2/ qrt is struggling to do >85K m2/qrt without unit costs blowout. Kloof which would do >4000kg/qrt is now doing R150K/kg on a production base = >12000kg/qrt . AGA’s assets are operated inefficiently and dogged by geological issues despite their superior gold grades.

      Furthermore, i refer you to what Lionel Phillips ( Rand Mines Boss in early 1900s)said about a mine , ±quote ” A gold mine is to important to be operated only for jobs. It should pay for many things like taxes , dividends and others than merely provide employment” . So the saving of jobs is a secondary benefit with a primary being maintaining profitability. The actions on the loss making Cooke ops is belated given the accumulated losses of R1750M ( excl Impairments ) since the ill-fated acquisition.

      I maintain that the AQP deal was rich and SBGL overpaid in whatever conceivable matric ( R/oz ; P/NAV ; TCC/OCF etc). Froneman has also admitted that SBGL paid full-price for AQP. The AngloPlat Rustenburg ops were a gift in comparison to AQP deal. Furthermore, Angloplat had ensured that they are CF +ve prior to Nov FY16. All Pt mines in RSA have shown improvement given the general deflation of input costs. The synergies story is a dicey one and refer you to the statement ( May IR ppt , pg= 21) by SBGL where they had reduced the synergy benefit to R400M/yr for FY17. Now they are claiming R550M realised in 8months !!! I am sceptical on this synergies benefits until i see the attendant production rationalisation etc.

      As any M&A person will tell you ” An expensive deal is an Expensive Deal”. The growth of SWL production requires further funding and Blitz project value was in the deal price. The SWL management had EV = $1200 -$1800M. Blitz project is a 150koz/yr-200koz/yr on a SWL production of 550Koz/yr at SWL acquisition so its Net Mine CF= ± $45M/yr LT 2E of Pt= $1200/oz & Pd = $1000/oz. Even with East Boulder Project will not raise the total OCF to >$250M/yr to get a sensible return in $1500/oz & Pd = > $1000/oz. I think you will concur thats not a basis to spend $2650M.

      Growing MCap is a different dynamic which i will be happy to engage you. As of June FY17 , SBGL Invested Capital = R68Billion so I expect MCap to be > R50Billion (IC – Net Debt = R52Billion) . So at equity/MCap= R40Billion , SBGL is still being marked down given that precious metal companies trade at > 1 P/NAV.

      I don’t bash Froneman at all and have never called for his axing because i believe he remains relevant to see through all this deals. But his underlings at the Gold division are “dropping the ball” and he needs to act decisively. A “difficult environment” presents opportunities to improve and innovate so you are making a mute point ….

      Sincerely ,
      Goldspeculator

  5. It is clear from the presentation yesterday (I’m assuming you armchair critics watched it) that Sibanye has undertaken the steps necessary to ensure the stability of the gold operations during the bout of current rand strength. The company takes its gold mining seriously and has limited further major job losses through the interventions undertaken. In a country where 80% of costs are power and labour, it is difficult to adapt overnight to a fall in gold prices from R600K/kg to R515K/kg knowing that labour reductions are governed by ridiculous laws where it can take up to 6 months to reduce the workforce. The asset base which the Sibanye team manages was destined for the toilet if the harvest plan presented by Goldfields was to have been followed. The actions of management has ensured that its gold asset base has provided the springboard for a major new metals company to evolve, and not recognising the new assets, their potential and the boldness with which the team took these acquisitive steps in a very poor metal price environment is also short-sighted. The dollar based Stillwater will allow SA to dive into chaos and the benefits of dollar earnings will ensure Sibanye’s future and the wellbeing of shareholders

    Remembering that a mining operation is like a tanker, it takes time to turn around. Sibanye recognised the causes of underperforming assets and action has been taken with the closure of some 6 to 8000ks of production. Production levels are a function of costs and capex within a detailed planning environment, and not simple a view on 2P numbers. Look at what Gold Fields was planning at the peak of the Harvest plan – even with the closure of Cooke 4 the current forecast production is higher. And lest we forget, Cooke was the key in WRTRP plans and was not acquired for underground. The decline in operating profits is almost entirely driven by lower rand gold prices and the closure of Cooke & Beatrix West will assist in reducing costs by R25,000/kg adding to better cashflows. They contributed significant losses – anyone with a brain can see that if you remove a loss, it is net positive.
    The acquired PGM assets were never expected to contribute in early years. In fact, both are likely to contribute well ahead of what Sibanye guided. Turnarounds take time and Blitz only reaches full production in 2022.
    Management changes are happening and again these cannot be implemented and produce results immediately. If that is the armchair critics thinking, get a life. And while we are at it, did you make millions out of knowing the uranium market was going south? And knowing the currency was headed to R12/13 to the dollar, did you short the miners?
    Operational changes and refocusing has been initiated as was stated at the results presentation. As before there will be an impact on both gold production and costs. Decisive action in closing the loss making operations will add impetus to the financial turnaround if the price environment remains constant. Clearly there is upside in the core operations, hence removing loss makers is prudent even though it does cost money.
    Criticising the Stillwater deal when prices have risen more than $200 an ounce is dumb. It was not undertaken without detailed planning and analysis. In 30 years’ time Stillwater will still be going while SA mining will be a relic in a museum. Once capex reaches normal levels post Blitz build up cash flows will be far greater than the historic $95m.
    Comments made about capitalisation share issues clearly show a lack of understanding. Rights issue require cash paid into the company, a capitalisation issue not, so it’s an effective 2% increase in your holdings, and given the outlook for better rand gold prices and the higher PGM basket (and who knows when the rand will Zimbabwify itself), having a few extra shares makes great sense while the cash remains inside the company to allow the growth to unfold. Insane stupid remarks about Froneman and his boat suggest a loathing or even paranoid jealousy. He has done an outstanding job with crappy assets, a stuffed up SA and price headwinds. Before bleating or responding, think.

    • Eye on you,

      In this miningmx forum we don’t call people who choose to share opinions “Dump & Stupid ” etc…. We treat each other with respect even if we dont know each others identities or industry status. We do take potshots at the well-known head-honchos with will…

      I , the glorious & opinionated armchair-critic , did watch the webcast. Furthermore, i do receive the media statements from SBGL regularly. The steps taken are well-meaning and long-awaited and SBGL should do more as always. As a mining executive , i hereby opine that the law allows for < 3 months to reduce labour. However, if you tip-toe on issues to unions and sundry, it will take you longer. Furthermore , revisit your cost structure because Labour & Power make up always 4 yrs is disingenuous. The fact of the matter is that SBGL is NOT an associate/subsidiary of GFI and as such determines its own operational strategy for its shareholders benefit. SBGL core gold mines potential is ± 50 000kg/yr and such should be pursued to eliminate performance/production tailing off. Rand Mines used to say the same about RSA diving into chaos etc, and they went extinct while mining in RSA prospered. So your doom-and-gloom forecast will never be borne out!

      Here is some metrics that you will need to ponder first before capitulating to management excuses. SBGL spends , over 4 yrs , on average R600M /qrt ORD Capex on its gold assets. This ORD spend yields >±15000m/qrt , and supposedly meant to provide mining flexibility for 350 000m2/qrt. Currently , same spend only delivers ± 270000 m2 mined area. Furthermore, the R/t unit costs have never been a concern for SBGL given the quality of the ore body ( CW ; MW ; cmg/t etc) as demostrated by their superior AISC margins of > R150K/kg. So the key Cash Flow divers seems obvious, thats is eliminate non-contributing mining areas and increase volumes because the 2P= 17Moz is vast, albeit over 3 x separate mining leases. Easier said than done, BUT IT HAS TO BE DONE!

      Many contributors , including myself , have reserved opinions on the Pt division’s contribution now. In this regard , I agree with you that its a play for the future which came at an inopportune costs ( > R7Billion) and nobody ever succeeds in calling a bottom of the cycle in the mining industry. The WRTRP is a non-starter at these U3O8 prices , and so it can never justify the Cooke Ops acquisition of R5,3Billion which proceeded to make further losses. The only winners were the chinese!

      I maintain that the AQP deal was rich and SBGL overpaid in whatever conceivable metric ( R/oz ; P/NAV ; TCC/OCF etc). Froneman has also admitted that SBGL paid full-price for AQP. The AngloPlat Rustenburg ops were a gift in comparison to AQP deal. Furthermore, Angloplat had ensured that they are CF +ve prior to Nov FY16. All Pt mines in RSA have shown improvement given the general deflation of input costs. The synergies story is a dicey one and refer you to the statement ( May IR ppt , pg= 21) by SBGL where they had reduced the synergy benefit to R400M/yr for FY17. Now they are claiming R550M realised in 8months !!! I am sceptical on this synergies benefits until i see the attendant production rationalisation etc.

      SWL was expensive and SBGL overpaid by >±$750M , and all investment bankers were unanimous in this regard including proxy firms ( ISS and Glass, Lewis & Co). The growth of SWL production requires further funding and Blitz project value was in the deal price. The SWL management had EV = $1200 -$1800M. Blitz project is a 150koz/yr-200koz/yr on a SWL production of 550Koz/yr at SWL acquisition so its Net Mine CF= ± $45M/yr LT 2E of Pt= $1200/oz & Pd = $1000/oz. Even with East Boulder Project will not raise the total OCF to >$250M/yr to get a sensible return in $1500/oz & Pd = > $1000/oz. With all the supposed “Planning and Analysis” , i dont think SWL was worth $2650M and planning & analysis is only as good as the assumptions and outcomes!

      Companies don’t just issue capitalisation shares for no good corporate end. There is a need to improve liquidity of the shares , more so for ADR holders. This is liquidating value in lieu of Dividends. Rightly so, the share price declined on announcement. It does NOT increase the value of shares ( or value of company) BUT the quantity of the outstanding shares. So your comment “it’s an effective 2% increase in your holdings, and given the outlook for better rand gold prices and the higher PGM basket (and who knows when the rand will Zimbabwify itself)” demonstrates ignorance of basic shares securities analysis.

      The SBGL core gold assets were NEVER crappy by any measure in GFI hands or SBG

      Sincerely ,
      Goldspeculator

  6. It is clear from the presentation yesterday (I’m assuming you watched it) that Sibanye has undertaken the steps necessary to ensure the stability of the gold operations during the bout of current rand strength. The company takes its gold mining seriously and has limited further major job losses through the interventions undertaken. In a country where 80% of costs are power and labour, it is difficult to adapt overnight to a fall in gold prices from R600K/kg to R515K/kg, knowing that labour reductions are governed by laws where it can take up to 6 months to reduce the workforce. The asset base which the Sibanye team manages was destined for the toilet if the harvest plan presented by Goldfields was to have been followed. The actions of management has ensured that its gold asset base has provided the springboard for a major new metals company to evolve, and not recognising the new assets, their potential and the boldness with which the team took these acquisitive steps in a very poor metal price environment is also short-sighted. The dollar based Stillwater will allow SA to dive into chaos and the benefits of dollar earnings will ensure Sibanye’s future and the wellbeing of shareholders

    Remembering that a mining operation is like a tanker, it takes time to turn around. Sibanye recognised the causes of underperforming assets and action has been taken with the closure of some 6 to 8000ks of production. Production levels are a function of costs and capex within a detailed planning environment, and not simple a view on 2P numbers. Look at what Gold Fields was planning at the peak of the Harvest plan – even with the closure of Cooke 4 the current forecast production is higher. And lest we forget, Cooke was the key in WRTRP plans and was not acquired for underground. The decline in operating profits is almost entirely driven by lower rand gold prices and the closure of Cooke &Beatrix West will assist in reducing costs by R25,000/kg adding to better cash flows. They contributed significant losses – anyone with a brain can see that if you remove a loss, it is net positive.
    The acquired PGM assets were never expected to contribute in early years. In fact, both likely to contribute well ahead of what Sibanye guided. Turnarounds take time and Blitz only reaches full production in 2022.
    Management changes are happening and again these cannot be implemented and produce results immediately. If that is the armchair critics thinking, get a life. And while we are at it, did you make millions out of knowing the uranium market was going south? And knowing the currency was headed to R12/13 to the dollar, did you short the miners?
    Operational changes and refocusing has been initiated as was stated at the results presentation. As before there will be an impact on both gold production and costs. Decisive action in closing the loss making operations will add impetus to the financial turnaround if the price environment remains constant. Clearly there is upside in the core operations, hence removing loss makers is prudent even though it does cost money.
    Criticising the Stillwater deal when prices have risen more than $200 an ounce is dumb. It was not undertaken without detailed planning and analysis. In 30 years’ time Stillwater will still be going while SA mining will be a relic in a museum. Once capex reaches normal levels post Blitz build up cash flows will be far greater than the historic $95m.
    Comments made about capitalisation share issues baffle me for one. Rights issue require cash paid into the company, a capitalisation issue not, so it’s an effective 2% increase in your holdings, and given the outlook for better rand gold prices and the higher PGM basket (and who knows when the rand will Zimbabwify itself), having a few extra shares makes great sense while the cash remains inside the company allowing the growth to unfold. Insane stupid remarks about Froneman and his boat suggest a loathing or even paranoid jealousy. Sibanye has done a good job in establishing a great platform, and earnings will follow. If you don’t like what is happening, buy some bank shares as mining is not for sissies.

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