Neal Froneman, CEO of Sibanye Gold

Despite experiencing a recovery in its third quarter output, gold producer Sibanye Gold expects lower full year output and is resultantly downgrading its production guidance for the year.

Despite the solid and continuing operational recovery after the operational challenges experienced during the March 2015 quarter, various operational disruptions and distractions related to the on-going wage negotiations have continued to impede a full production recovery.

“As such we are downgrading the guidance for the year,” Sibanye CEO Neal Froneman said in an announcement to shareholders.

Sibanye said in the announcement that although operating trends continued to improve during the September 2015 quarter, and even with a further forecast improvement for the December 2015 quarter, it is unlikely that it will be able to claw back production that was lost during the March 2015 quarter.

Sibanye expects its earnings per share and headline earnings per share for the year ending 31 December 2015 to be more than 20% lower than for the corresponding period in 2014, which were 186 cents and 170 cents per share respectively.

Gold production is forecast to be between 4% and 6% lower than original guidance. Guidance is now between 1.51 Moz and 1.54 Moz.

At these production levels, total cash cost is forecast at between R350 000/kg and R360 000/kg and all-in sustaining cost (AISC) at between R425 000/kg and R435 000/kg.

Costs in dollar terms remain largely unchanged due to the weaker rand/dollar exchange rate which is forecast at an average R12.50/US$ for 2015. Total cash cost is forecast at between US$870/oz and US$895/oz and AISC between US$1 060/oz and US$1 085/oz.

Sibanye said that healthy margins were maintained during the September quarter, notwithstanding the impact of higher electricity tariffs, resulting in above inflation electricity costs, and provisions for the increased wages.

Group gold production of 410 600 oz for the September 2015 quarter was 3% lower than for the comparable period in 2014, but 3% higher than that achieved in the June 2015 quarter.

The average rand gold price received for the September 2015 quarter increased by 6% to R470 349/kg due to a 21% depreciation of the rand against the US dollar year-on-year, to an average of R13.00/US$ for the September 2015 quarter. This was despite a 12% year-on-year decline in the average dollar gold price to US$1 126/oz.

Operating profit for the period amounted to R1.6 billion.

Total cash cost of R348 857/kg and the AISC of R420 811/kg increased by 11% and 9%, respectively, but in dollar terms remained globally competitive, with total cash cost 8% lower at US$835/oz and AISC 10% lower at US$1 007/oz.

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