Sibanye defends 1.6m oz 2014 output target

[miningmx.com] – SIBANYE Gold said it was confident it could reach its full-year gold production target of 1.61 million ounces despite it having to achieve a 13% improvement over its record September quarter performance.

Production to date was 1.14 million ounces – some 9% higher than at the same stage in its 2013 financial year – and would mean output of 480,000 oz for the December quarter compared to 424,000 oz it achieved in the September quarter, a record for Sibanye.

However, the fourth or December quarter is traditionally an awkward period for South African gold producers with absenteeism and lower productivity a feature of seasonal holidays, especially as a large portion of labour is migrant.

“It’s a stretch target,” said James Wellsted, head of corporate affairs for Sibanye. “But the Cooke operations are still building and if we achieve slightly better than last year’s output at Kloof, Driefontein and Beatrix of 12.5 tons (400,000 ounces), then we need about 2.5 tons from Cooke (equal to 80,000 oz),” said Wellsted.

“It’s tough and it’s based on not having any problems in the December quarter, but we certainly think this can be achieved,” he said.

“Achieving full year production guidance appears to be a stretch and we will continue to acutely monitor costs (particularly at Cooke) going forward,” said Macquarie Research in a note this morning.

Sibanye produced an operating profit of about R1.78bn for the September quarter which is estimated will keep free cash about between R900m to R1bn before tax, and would support its pledge to pay dividends.

This is despite the escalating cost of operating in South Africa which saw higher electricity tariffs from Eskom, and the first effects of wages increases.

Costs also increased as Sibanye intensified its ore reserve development with on-reef development increasing just under a third year-on-year.

All-in Sustaining Costs were 15% higher in the quarter at about R384,777/kg or some $1,116/oz. By way of indication, the rand gold price has risen to R450,000/kg and fallen to a low of just above R430,000/kg since the end of July.

“The group will, as it has in the past, work out these above inflation cost increases over time,” said Sibanye Gold in commentary to its September quarter figures. The build up in uranium by-products from the Cooke operations would also lower costs, it said.

Cooke 4, however, continued to make a loss in the quarter forcing Sibanye into issuing a Section 189 notice to employees ahead of a possible restructuring.

“The Section 189 process involves a 60-day consultation period with trade unions and affected employees during which parties will attempt to cooperatively address the productivity and profitability shortfall issues at the operation,” it said.

Shares in Sibanye Gold were 1.5% higher on the Johannesburg Stock Exchange while shares in Gold Fields and Harmony were both less than a percent weaker. AngloGold shares were 0.45% higher.