Sibanye Gold - Q3-2016 update and trading statement

A PROUDLY SOUTH AFRICAN MINING COMPANY 

WESTONARIA 27 October 2016:  Sibanye Gold Limited (Sibanye or the Group) (JSE: SGL & NYSE: SBGL - http://www.commodity-tv.net/c/mid,2697,Company_Presentation/?v=296429) is pleased to provide a trading statement and operating update for the quarter ended 30 September 2016. Detailed financial and operating results are provided on a six-monthly basis i.e. at the end of June and December each year.

TRADING STATEMENT

Shareholders are advised that Sibanye has a reasonable degree of certainty that its earnings per share for the year ending 31 December 2016 is expected to be a minimum of 200% (158 cents per share (cps)) higher, than the 79cps reported for the year ended 31 December 2015 (or the comparable period) or a minimum of 237cps. Headline earnings per share for 2016 is expected to be a minimum of 330% (244cps) higher than the 74cps reported for 2015, or a minimum of 318cps. Normalised earnings per share for 2016 is expected to be a minimum of 220% (295cps) higher than the 134cps reported for 2015, or a minimum of 429cps. The financial information on which this trading statement is based is at an average rand gold price for the year of R590,000/kg, excludes the effect of the Rustenburg Transaction and has not been reviewed or reported on by Sibanye’s auditors. A further trading statement with a more definitive range will be released closer to the financial year end.

OPERATING UPDATE

¹ The platinum division’s performance is for the quarters ended 30 September 2016 and 30 June 2016, as the Aquarius group was only acquired on 12 April 2016.

OVERVIEW AND UPDATE FOR THE QUARTER ENDED 30 SEPTEMBER 2016 COMPARED WITH THE QUARTER ENDED 30 SEPTEMBER 2015

Group operating profit increased strongly, improving by 71% to R2.7 billion for the September 2016 quarter, driven largely by a higher rand and dollar gold price, and good cost management at both the Gold and Platinum Divisions.

There was a noticeable improvement in the operating performance of the Gold Division during the latter half of the September 2016 quarter, following a review of the Group safety strategy in August 2016. Operating profit for the Gold Division increased by 59% to R2.5 billion, with the operating margin increasing from 27% to 36%. This was largely due to a 27% higher rand gold price, which averaged R597,705/kg (US$1,322/oz), with unit costs for the Gold Division similar year-on-year at R874/ton. The above results include the termination of planned gold production from Cooke 4 of over 500 kg per quarter.

The Platinum Division again delivered a record quarterly performance, recording its highest September quarter production in over a decade, with cash operating costs notably low in both rand and dollar terms. Despite low prevailing platinum group metal (PGM) prices, the Platinum Division contributed R190 million to Group operating profit, at a 25% margin.

Safety

Following the review of Sibanye’s safety strategy in August 2016 and subsequent roll out of the initial phases of the revised strategy, there has been a noticeable improvement in the safety performance at Sibanye’s Gold Division. Reportable incidents declined significantly in August and September, with zero fatalities recorded. The Gold Division achieved 2 million Fatality Free Shifts (FFS) on 10 October 2016, with the Serious Injury Free Rate (SIFR) improving by 27% to 3.72 per million man hours and the Lost Day Injury Free Rate (LDIFR) improved by 24% to 6.08 per million man hours. 

Regrettably, as highlighted during the interim results in August 2016, three fatalities occurred at the Gold Division in July 2016, prior to the safety review.  Sibanye management and Board express their sincere condolences to the families and colleagues of Mssrs – Mongezi Bagege; Enock Tsabedze and Lehlohonolo Masithela.

The Platinum Division’s excellent long term safety performance, was blighted by an unfortunate fatal accident at its Kroondal operation in August 2016. This was the first fatal incident for the Platinum Division in 23 months. Sibanye management and its Board express their condolences to the family and friends of the deceased, Mr. Kabelo Rangagwa.

Gold Division

Safety and operational trends at the Gold Division were much improved in August and September, following a review of the safety strategy and management intervention in August 2016. Overall, Section 54 stoppages declined compared to the previous quarters in 2016. Gold production for this quarter was 11,897kg (382,500oz), which is similar to the previous quarter, but 7% lower than for the same period in 2015. Lower underground volumes were supplemented where possible by surface rock dump material, albeit at lower grades.

Costs at the Gold Division were well controlled, despite above inflation increases in annual wages and electricity tariffs. Operating costs of R4,580 million were approximately 4% higher than for the September 2015 quarter, with unit costs stable at R874/ton milled. All-in sustaining cost increased from R420,811/kg, in the same period in 2015, to R479,785/kg mainly as a result of lower gold production. 

Kloof had a much-improved quarter producing 3,617kg (116,300oz) compared with 3,168kg (101,900oz) for the September 2015 quarter. This 14% increase in production was a function of an 11% increase in underground throughput and improved yields. Gold production from surface sources increased by 13% to 361kg (11,600oz), driven by a significant increase in volumes processed. 

Driefontein experienced various production disruptions this quarter, specifically at its Masakhane and Hlanganani shafts. Stoppages related to engineering issues, resulted in underground gold production declining to 3,468kg (111,500oz). A 6% increase in the underground yield, due to significantly improved mining quality factors, only partly offset a 20% decline in underground throughput resulting from the aforementioned disruptions. Lower underground volumes were supplemented with surface material where possible, resulting in production from surface sources increasing from 532kg (17,100oz) to 550kg (17,700oz). 

At Beatrix, underground gold production of 2,438kg (78,400oz) was similar to the previous quarter but was 11% lower year on year due to lower underground grades and volumes. Surface production was comparable year-on-year at 115kg (3,700oz).

Post the section 189 consultation process which started in July 2016 the Cooke 4 underground operation has ceased production and primarily as a result, gold production at the Cooke section declined from 1,630kg (52,400oz) for the September 2015 quarter, to 1,126kg (36,200oz) for the period under review. The Ezulwini gold plant continues to be used to process Kloof SRD and Cooke 3 underground volumes on a limited basis. Surface gold production increased by 7% to 222kg (7,100oz).

Platinum Division

The Platinum Division delivered record attributable PGM production of 94,791oz (4E) for the September 2016 quarter. This is a particularly pleasing outcome given the punitive interventions by the Department of Mineral Resources in this region and the knock-on effects of the illegal industrial action in the previous quarter. Costs were well managed resulting in the Platinum Division recording a R190 million operating profit and a 25% cash operating margin for the quarter. 

Mimosa and Platinum Mile delivered solid results, with Platinum Mile delivering significantly higher production compared with the June 2016 quarter.  Quarterly cash operating costs at Kroondal amounted to R9,453/4Eoz (US$672/4Eoz), and at Mimosa, US$724/4Eoz (R10,179/4Eoz). As a result of the increase in production at Platinum Mile cash operating cost of R6,361/4Eoz (US$452/4Eoz) were achieved, resulting in a 39% cash operating margin (before royalties).

Section 11 approval for the acquisition of the Rustenburg assets from Anglo American Platinum Limited was granted by the Department of Mineral Resources on 18 October 2016. Sibanye will now assume ownership and control of the Rustenburg assets effective 1 November 2016.

Outlook

The annual gold production guidance for 2016 has been reduced from 50,000kg to 48,500kg at a total cash cost of approximately R380,000/kg and an All-in sustaining cost of approximately R460,000/kg. The All-in cost margin guidance remains at approximately 20%, this assumes a gold price of US$1,255/oz for the December 2016 quarter and an exchange rate of R14.00/US$.

For the December 2016 quarter, PGM production guidance is approximately 88,000oz (4E) with cash operating cost for the Division estimated at approximately R9,700/4Eoz (US$693/4Eoz), with cash operating cost for the operations estimated at approximately: R9,600/4Eoz for Kroondal, US$700/4Eoz for Mimosa and R6,500/4Eoz for Platinum Mile. The guidance excludes the Rustenburg Operations.

27 October 2016

Neal Froneman

Chief Executive Officer

Contact Europe:

Swiss Resource Capital AG

Jochen Staiger

info@resource-capital.ch

www.resource-capital.ch