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Sibanye ups Q1 gold output 11%, awaits ruling on strike

Sibanye ups Q1 gold output 11%, awaits ruling on strike

Photo by Bloomberg

24th April 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Johannesburg- and New York-listed Sibanye Gold has improved its year-on-year production of gold, lifting output by 11% to 332 400 oz for the quarter ended March 31 as the company’s Driefontein, Kloof and Beatrix mines strengthened production over the three months.

Gold production from the Driefontein mine, in Gauteng, increased by 3% on the comparable 2013 quarter to 130 900 oz, but was 19% lower than that of the December 2013 quarter.

This was primarily owing to lower underground volumes mined as a result of reduced shifts, arising from the yearly break, as well as a fatality at Driefontein 4 shaft and a fire at 6 shaft, which caused production disruptions at a number of other shafts throughout the quarter.

Gold production from the Kloof mine, in Gauteng, increased by 11% from 113 100 oz in the March 2013 quarter to 125 200 oz for the first three months of 2014, but decreased by 5% from 132 300 oz for the last three months of 2013.

Sibanye’s Free-State based Beatrix gold mine lifted production for the quarter by 28% to 76 200 oz, but declined by 17% from the December 2013 quarter’s output of 91 300 oz owing to the Christmas break.

Eight shifts were also lost as a result of a Section 54 stoppage being issued at Beatrix West, which restricted access while repairs were carried out on a second escape route in February.

“Sibanye’s operating results for the March quarter are ahead of [the company’s] forecast and reflect a solid operating performance. The March quarter is traditionally a quarter impacted on by the December holiday period resulting in fewer operating shifts,” CEO Neal Froneman said in a statement.

OPERATING COSTS

An all-in operating cost of $1 050/oz was 9% lower than the $1 398/oz reported in the March 2013 quarter, mainly owing to the increase in production year-on-year and the benefits realised from the implementation of the
new Sibanye operating model.

Capital expenditure amounted to R619-million for the three months and included R452-million spent on ore reserve development, with the balance invested in mining equipment and infrastructure.

The Driefontein, Kloof and Beatrix operations generated an operating profit of R1.74-million over the quarter, 15% higher than the R1.5-million operating
profit generated in the same period last year.

These results were achieved at an average gold price of $1 304/oz, which was 4% lower than that achieved in the March 2013 quarter.

Cash and cash equivalents at the end of the period amounted to around R1.24-million after paying dividends, royalties and half yearly taxes, while the group’s net debt position at the end of March was R748-million.

ACQUISITIONS

Meanwhile, on April 14, Sibanye concluded the acquisition of Witwatersrand Consolidated Gold Resources (Wits Gold) for R407-million and exercised the option held by Wits Gold to acquire the Burnstone gold mine, subject to certain conditions precedent.

This followed the successful conclusion of a detailed due diligence and was based on the already significant investment by the mine’s previous owners, Great Basin Gold, in mine development and infrastructure.

“The acquisition is consistent with Sibanye’s strategy to create value through extending the operating life of the group in support of its dividend yield strategy,” Froneman said.

The group also assumed interim management control of the Cooke Operations from March 1, but finalisation of the acquisition remained subject to the approval by Mineral Resources Minister Susan Shabangu.

INDUSTRIAL RELATIONS

Meanwhile, in January, the Association of Mineworkers and Construction Union (AMCU), issued strike notices at all gold shafts where it was the recognised majority union, which included Sibanye’s Driefontein operation as well as two Harmony Gold mines and the majority of AngloGold Ashanti’s operations.

After receipt of a strike notice, an application for an interdict against the strike was lodged with the Labour Court by the Chamber of Mines on behalf of the gold companies, on the basis that a prior collective wage agreement signed by the other majority unions in the gold sector had legitimately been extended to AMCU members.

Owing to the complexity of the issues, the court reserved judgment, and issued an interim order restraining AMCU from initiating strike action.

An order was issued on January 30, declaring any potential strike action by AMCU unprotected.

“AMCU has decided to challenge this ruling and a court date has been scheduled for June 5. In the interim, the interdict on any strike action remains valid,” the company noted.

OUTLOOK

Looking to the remainder of the year, Sibanye forecast that gold production for the six months ending June 30 would be around 690 000 oz, with total
cash costs and all-in costs for the six-month period forecast at $860/oz and $1 080/oz respectively.

Electricity tariff increases and higher winter electricity rates were expected to offset the forecast increase in production in the June quarter.

Overall yearly production was forecast at about 1.41-million ounces at total cash costs of $800/oz and all-in costs of $1 070/oz.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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