SIBANYE-Stillwater adjusted its expected gold production down slightly as damage suffered during seismic activity in April was more severe than anticipated, but this was the thin end of the wedge as lower gold production weighed on pre-tax earnings whilst two class actions await the company and its top executives.
The operational strain under which the gold division labours also influenced wage negotiations with unions which means Sibanye-Stillwater is the only gold major not to have settled new three-year wage deals with unions. The company said it was “striving” to avoid a strike, but it added it was “well prepared” were one to transpire.
At group level, earnings before interest, tax, depreciation and amortisation (EBITDA) came in 40% lower year-on-year at R1.6bn for the third quarter (Q3 2017: R2.7bn), and 27% below the previous quarter’s EBITDA. Given the platinum division produced a solid quarter, the damage was largely sustained at the South African gold division.
Adjusted EBITDA was R243m (R1.4bn) for the gold division. The South African platinum division increased EBITDA to R695.5m (R535m) whilst at the US operations deliveries of platinum group metals (PGM) did not occur for September after a buyer undertook an inventory review. This metal will be released in the current quarter. EBITDA from the US PGMs was down year-on-year at some R690m (R788m).
The main factor behind the poor performance of Sibanye-Stillwater’s gold division was the seismic activity at Driefontein’s Masakhane shaft were work is currently underway rehabilitating the area, damaged by a seismic event on 4 May 2018. The event followed a tragic seismic event the previous which contributed to total fatalities at the group’s underground gold and platinum mines of 21 souls as of July.
“The ongoing effects and the trauma caused by the H1 safety incidents have been more severe than anticipated resulting in 2018 annual guidance being revised accordingly,” the company said in notes to its third quarter numbers.
Production was therefore likely to be between 1.13 to 1.16 million ounces compared to guidance of 1.17 to 1.21 million oz in previous guidance. All-in sustaining costs are expected to be $1,311 per oz and $1,347/oz or R550,000/kg and R565,000/kg which compares to R515,000/kg and R530,000/kg previously.
The class actions, brought in the United States District Court for the Eastern District of New York against Sibanye Gold as well as Sibanye-Stillwater CEO, Neal Froneman and CFO Charl Keyter allege violations of the US securities laws, specifically that false or misleading information was distributed about the firm’s safety standards and record. Damages claimed in the class actions were “unspecified”, said Sibanye-Stillwater.
