Sibanye has reported strong financial results for the six months ended 30 June 2016, driven largely by a higher prevailing rand gold price, but underpinned by solid operational delivery from both the gold and platinum divisions.
The dividend demonstrates Sibanye’ commitment to paying an industry-leading dividend. The total dividend for the year ended 31 December 2015 was of R917 million.
The highly leveraged nature of the gold operations was clearly evident during the period: a 31% increase in the average rand gold price to R603 427/kg and a 5% increase in gold production resulted in operating profit from the gold division increasing by 125% to R5.3 billion from R2.4 billion for the comparable period in 2015.
The platinum division, which was incorporated from 12 April 2016 following the conclusion of Aquarius Platinum’s acquisition, delivered record quarterly production of 92 773 oz (4E), resulting in an attributable operating profit of R72 million ($5 million).
Normalised earnings of R2.2 billion for the six months ended 30 June 2016, was, as a result, R1.9 billion higher than the R243 million reported for the comparative period in 2015.
Headline earnings and basic earnings were impacted by an extra-ordinary R1.2 billion fair value loss on financial instruments which resulted from the significant increase in Sibanye’s share price during the period.
Moreover, basic earnings were impacted by an R819 million impairment of the value of the Cooke 4 assets.
Headline earnings and basic earnings for the six months ended 30 June 2016 were R1.1 billion and R333 million respectively, compared with headline earnings of R170 million and basic earnings of R180 million for the comparative period in 2015.
Cash generated by operations more than doubled to R5.1 billion, resulting in substantial free cash flow (defined as net cash from operating activities before dividends paid, less additions to property, plant and equipment) of R1.5 billion. This includes an extra-ordinary payment of R1. 49 billion in terms of the SGL share plan.
Free cash flow, adjusted for this extra-ordinary payment, would have been R3 billion.
Neal Froneman, Sibanye Gold’s CEO says: “The first half of 2016 has been very positive for mining companies and gold producers in particular.
“The firmer gold and platinum prices and weak rand have driven a very good financial result, underpinned by a solid operational performance,” says Froneman.
This has enabled Sibanye to continue to generate strong cash flow, maintain a robust balance sheet and continue to deliver on its commitment to pay industry leading dividends.
Sibanye Gold H2, 2016 production forecast
Barring any unplanned disruptions, Sibanye’s gold division should deliver a significantly improved performance in the second half of the year and production guidance of 50 000 kg (1.6Moz) remains unchanged, albeit that the future of Cooke 4 shaft is currently under review.
Total cash cost is forecast at approximately R355 000/kg ($760/oz) and the all-in sustaining cost at approximately R425 000/kg ($910/oz). The capital expenditure forecast also remains at R3.9 billion ($270 million).
Attributable production from the platinum division for the nine months ending 31 December 2016 is forecast at 260 000 oz (4E), at an average cash operating cost of R10 600/4 Eoz ($735/4 Eoz). Attributable capital expenditure is forecast at approximately R225 million.
However, these forecasts do not assume any production from the Rustenburg assets for 2016.
“The outlook for the rest of the year remains very positive, but management is aware that of the risk of complacency during periods of high margins. We have therefore refocused our energy on: improving our safety performance, which has slipped; maintaining our attention on cost management and operational efficiency, and ensuring capital discipline” Froneman concludes.