[miningmx.com] – RESTRUCTURING costs saw Sibanye Gold post a decline in interim headline earnings, but CEO Neal Froneman said the company was registering improvements and expected production to be 8% higher in the second half resulting in full-year output of 1.35 million ounces.
The risk to production targets was strike activity in reference to which Froneman issued a warning to unions saying the company would “not be coerced into unsustainable ounces”. He also said wage demands issued by unions in June bore “no reference to cost and revenue pressures”.
Sibanye Gold’s adjusted headline earnings, which include R343m in restructuring costs at the Beatrix West, Driefontein and Kloof mines, but exclude a R821m write-down following a fire at Beatrix West, came in at 120c/share. This compares to headline earnings of 344c/share in the first half of the previous financial year, ended June 31.
Nonetheless, the market liked the results from Sibanye Gold with shares in the company increasing 5.5% in early Johannesburg trade, no doubt assisted by the $5 per ounce improvement in the gold price in Asian trade.
Froneman said that at 356,900 ounces, gold production in the second quarter was 19% higher than in the first quarter – partly owing to the fire at Beatrix West – but some 16,000 ounces higher than guided. As a result, costs were also better. “These improving trends have continued into July and further operational improvements are expected,” said Froneman.
Froneman said the interim results “… support[ed] my belief that these assets, despite having been in operation for many decades, are still some of the best gold mines in the world and, will continue to be so for many years to come”.
Sibanye Gold generated cash of R1.8bn for the period taking available cash to R2.1bn and reducing net debt to R1.9bn. Following its demerger from Gold Fields in February, Sibanye Gold was carrying about R4bn in debt.
As expected, Sibanye Gold held back from an interim dividend declaration in the absence of a wage settlement with unions. This was in terms of an agreement with its lenders who agreed an interim dividend could be paid provided wage negotiations had first been concluded.
Froneman said the company wanted to become “a benchmark dividend payer” and added the firm would also pay special dividends.
“The improving operational performance and the debt restructuring has ensured that the company is well placed to declare a maiden dividend, once there is sufficient financial and operational stability. Management remains committed to being a benchmark dividend payer,” he said.
Sibanye Gold’s West Rand Tailings Joint Venture Project with Gold One was now subject to an internal review following completion of a prefeasibility study, the results of which would be published in the September quarter.
Froneman was bullish on its prospects, however. “With the good and visible progress that has been made on restoring operational credibility, it is now appropriate to focus on securing the future of our fourth mine, the West Rand Tailings Project,” he said.
He also alluded to extending the life of Beatrix “… through the very significant gold and uranium resources contained within the current mining lease area”.
