Sibanye Gold today, 25 August 2016, 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.
Sibanye again demonstrated its commitment to paying an industry leading dividend, declaring an interim dividend of ZAR785 million or 85 cents per share.
This compares with an interim dividend of ZAR91 million, 10 cents per share, declared in H1 2015 and the total dividend for the year ended 31 December 2015, of ZAR917 million, 100 cents per share.
The highly leveraged nature of the gold operations was clearly evident during the period: a 31% increase in the average rand gold price to ZAR603,427/kg and a 5% increase in gold production resulted in operating profit from the Gold Division increasing by 125% to ZAR5.3 billion (US$346 million) from ZAR2.4 billion (US$199 million) for the comparable period in 2015.
The Platinum Division, which was incorporated from 12 April 2016 following the conclusion of the Aquarius Platinum Limited acquisition, delivered record quarterly production of 92.773oz (4E), resulting in an attributable operating profit of ZAR72 million (US$5 million).
Normalised earnings of ZAR2 152 million (234 cents per share) for the six months ended 30 June 2016, was as a result, ZAR1.909 million higher than the ZAR243 million (27 cents per share) reported for the comparative period in 2015.
As previously highlighted in trading statements released on 27 July 2016 and 18 August 2016, headline earnings and basic earnings were impacted by an extra-ordinary ZAR1.2 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 ZAR819 million impairment of the value of the Cooke 4 assets.
Headline earnings and basic earnings for the six months ended 30 June 2016 were ZAR1.1 billion (121 cents per share) and ZAR333 million (36 cents per share) respectively, compared with headline earnings of ZAR170 million (19 cents per share) and basic earnings of ZAR180 million (20 cents per share) for the comparative period in 2015.
Cash generated by operations more than doubled to ZAR5 126 million (US$333 million) resulting in substantial free cash flow (defined as net cash from operating activities before dividends paid, less additions to property, plant and equipment) of ZAR1 536 million.
This includes an extra-ordinary payment of ZAR1.490 million in terms of the SGL share plan.
Free cash flow, adjusted for this extra-ordinary payment, would have been ZAR3.026 million (US$197 million).
Following the conclusion of the ZAR4.3 billion acquisition of Aquarius during the period, net debt to EBITDA has increased to 0.41 times, which is well below industry averages and well within our own internal guideline of 1.0 times.
The South African mining industry generally delivers seasonally higher production and overall improved operational results during the second half of the calendar year, primarily due to fewer public holidays than in the first six months of the year.
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 000kg (1.6Moz) remains unchanged, albeit that the future of Cooke 4 shaft is currently under review.
Total cash cost is forecast at approximately ZAR355 000/kg (US$760/oz) and the All-in sustaining cost at approximately ZAR425 000/kg (US$910/oz).
The capital expenditure forecast also remains at ZAR3.9 billion (US$270 million).
Attributable production from the Platinum Division for the nine months ending 31 December 2016 is forecast at 260 000oz (4E), at an average cash operating cost of ZAR10 600/4Eoz (US$735/4Eoz).
Attributable capital expenditure is forecast at approximately ZAR225 million (US$15 million).
These forecasts do not assume any production from the Rustenburg assets for 2016.
“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. 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,” says Neal Froneman, Sibanye Gold Chief Executive Officer.
“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,” says Froneman.