South Africa-focused Sibanye Gold, which posted its sixth consecutive above-guidance quarter last week, has set its sights on being a benchmark dividend payer in the gold mining sector.

The Johannesburg- and New York-listed gold-mining company paid an interim dividend for the six months to June 30 that exceeded its dividend policy and is projecting a minimum of R1-billion a year for the next 14 years on 1.4-million ounces of gold being produced until 2028.

Cash for project and growth options would take a back seat to dividend declaration, CEO Neal Froneman reiterated to sceptics at the company’s latest presentation of results, which saw the board approve a 50c-a-share sum to shareholders, which translates into a dividend yield of 3.5%.

Dividend sustainability is now the foundation of every single company decision, Froneman said, after Sibanye showed that it could produce gold at an all-in cost (AIC) of just over $1 000/oz (R367 000/kg), which provides room for considerable cash generation even with gold below $1 300/oz.

Half-year (H1) operating profit increased 4% to R3.5-billion ($327-million) and gold production rose 8% to 22 143 kg (711 900 oz).

Operating costs declined 10% to R815/t and the AIC margin remained unchanged at 17% on a 2% lower gold price.

Since the start of the year, the value of Sibanye shares has outperformed the gold price and the JSE All Share by a major margin.

The company’s gold mineral reserves have increased 66% to 32.7-million ounces and its uranium mineral reserves 139% to 102-million pounds, which provides confidence for production to remain buoyant at well over 1.4-million ounces a year for many years to come.

Its gold production profile, which is already well beyond what it inherited from Gold Fields, has the seeming potential to generate ongoing free cash flow to pay at least R1-billion a year in dividends to 2028.

The company is thus poised to be able to fund its current dividend profile for another 14 years from current gold reserves.

“We’re very confident of the sustainability of our dividend,” Froneman told Mining Weekly.

With the inclusion of projects in different phases of study – from prefeasibility to feasibility but with sufficient work done to allow a cash flow analysis – “conceptual” gold production extends the life of the country’s operations well past 2030, when stapled onto the current reserve profile.

The projects are being sequenced to guarantee their funding from cash flow.

Capital envisaged will be at a maximum of $250/oz.

Should Sibanye be able to keep its total cash costs at $800/oz to $900/oz at current gold prices, free cash will flow strongly.

A schematic flashed onto a big screen at the presentation showed ample dividend yield well into the future.

Projected cash generation after capital and tax showed much headroom for the company’s dividend commitment.

“We’re really confident, even if just based on the reserve profile, that the level of dividends is sustainable.

Obviously, disruptions beyond our control, like fires, strikes and economic crises, could interrupt things, but assuming the continuity of our business without these external factors shows the dividend to be affordable,” Froneman told Mining Weekly.

Sibanye CFO Charl Keyter explained that the dividend payment included the issuing of 17% more shares, bringing the total earnings made available for the dividend to nearly R450-million, which was based on 898 301 633 shares.

Sibanye is projecting a gold production of just over 50 t ,or 1.6-million ounces, for the year at an AIC of $1 070/oz (R365 000/kg) to $1 085/oz (R370 000/kg) and a capital expenditure (capex) of R3.5-billion.

The recently acquired Cooke operation made a positive contribution to operating profits and operating cash flow after capex in the first month of incorporation.

Sibanye’s mature Kloof, Driefontein and Beatrix operations produced 2% higher profit but a major blot on the company’s performance was the death at work of five employees, resulting in a group fatal injury frequency rate of 0.12, compared with 0.10 last year.

Cash generated from operations was R3 886- million ($364-million) and operating cash flow after capex was R2 540-million ($238-million), an increase of R276-million year-on-year.

Net debt for the same period increased to R617-million ($58-million), up 24%.

Surface gold reserves rose 58% to 7.1-million ounces, mainly on the addition of the Cooke tailings.

Following media coverage of Sibanye’s intentions to pursue an acquisition in the plati-num sector, Froneman said, Sibanye would pursue platinum opportunities, provided they underpinned the company’s dividend yield strategy.

In favour of the investment was the opportunity to leverage Sibanye’s proven deep-level-mining capability and the securing of the services of former JPMorgan platinum analyst Steve Shepherd.

n uranium, Sibanye has sent 20 t of ammonium diuranate to the Nuclear Fuels Corporation of South Africa, owned by AngloGold Ashanti.

Uranium production from Cooke is forecast at 500 000 lb/y by 2016 and extraction of uranium from Sibanye’s surface tailings will realise seven-million ounces of gold.

Up to 350 000 lb/y of uranium could be realised from the initial phases of the West Rand tailings retreatment project.

Uranium by-product sales, which offset the cost of producing gold, increase the viability of mining gold that may otherwise be uneconomic to extract.