[miningmx.com] – SIBANYE Gold CEO, Neal Froneman, said the 10-year slump in the fortunes of two of South Africa’s highest value gold mines – Kloof and Driefontein – had been arrested following a third successive quarterly operating improvement.
At 387,000 ounces, combined September quarter gold production from Driefontein, Kloof and the Beatrix mines was 7% higher quarter-on-quarter and 27% higher compared to the corresponding quarter in the previous year, although it was at that time that Gold Fields, the previous owner of the mines, had been heading into strike activity.
Notwithstanding the overall good performance, the Kloof operations had a poor quarter owing to work stoppages related to three underground fatalities. “There were three ‘fatals’ of which two it is questionable that they are mine accidents,” said Froneman. Gold production fell by 6% quarter-on-quarter at Kloof, but Froneman said it would return to normal levels in the December quarter.
Froneman said in a commentary to the published figures that the improved gold production, and a 4% decline in costs, had “… arrested the negative trends that have characterised these operations over the last decade”.
And in perhaps a greater expression of confidence, Froneman has forecast only a minor drop in gold production for the normally troublesome December quarter when seasonal holidays disrupt the mines. Output would be about 378,000 ounces produced at an all-in sustaining cost of R355,000/kg versus the R339,847/kg achieved in the September period under review. Full-year production was estimated at 1.55 million oz compared to previous estimates of 1.48 million oz.
Cash generation and yield remains Sibanye Gold’s clarion call to investors.
The company generated R811m in the quarter enabling it to reduce its R4.2bn debt pile in February, when it debuted on the JSE, by a further R750m. All in all, Sibanye Gold had lowered gross debt 40% and said it would continue to make in-roads on borrowings given the uncertain nature of the market.
In news that will warm the hearts of investors, Froneman added that the company was on course to pay a final dividend equal to 35% of normalised earnings. The 37c per share interim dividend, equal to R271m, it paid in the second quarter was equal to a 7% dividend yield at the then share price which Froneman said made Sibanye Gold the highest yielding payer in world gold.
Responding to an analysts question in a mid-morning telephonic conference, Froneman said the company “kept an open mind” regarding opportunities to pay a special dividend. However, Sibanye CFO Charles Keyter, suggested significant cash would be paid out anyway as the company sought to take the total average payout to 35% of normalised earnings (versus the 25% paid at the interim).
A detailed mine plan for the company’s mines, including an updated ore reserve and resources statement, is due for publication in the first quarter of 2014. It’s expected that Froneman will unveil a much stouter production profile for Kloof and Driefontein which were considered to be ‘harvest mines’ previously.
Froneman added that the company expected to complete the acquisition of the Cooke operations from Gold One International “early in 2014”, a transaction that would add some 260,000 ounces of gold a year to Sibanye Gold’s profile.
Shares in Sibanye Gold increased 3% to R13,95/share by 11am CAT, about R1 off the company’s high since listing, but it was almost double the value since end-June when it was trading at about R7.30/share.
Commenting on the prospect of a strike at Driefontein, where the Association of Mineworkers & Construction Union (AMCU) is the majority union, Froneman said the company would take firm action. “We will interdict them and have the strike declared illegal and see what happens from there”.
AMCU is yet to agree to the 8% wage increase signed with the National Union of Mineworkers and other unions in September.
Said Froneman: “We have made very good in-roads in hearts and minds of employees. There is alot of disillusionment around organised labour,” he said.
Citing labour experts, BDLive said in September that in terms of the Labour Relations Act, AMCU was entitled to refuse the offer on operations where it has a majority which also include the Carletonville mines of Mponeng (AngloGold Ashanti), Kusasalethu (Harmony) as well as Sibanye Gold’s Driefontein.
“We do not believe AMCU will be able to have a legal strike,” said Froneman. “We have a clear indication that appetite for strike is very low. We have an agreement which has been rolled out across operations.”
