Sibanye flags a R4.8bn first-half loss
WESTONARIA-based Sibanye Gold is in the red, flagging yesterday that it would report a R4.8 billion loss in the half year to June from earnings of R333 million in the prior period as the strong rand and once-off items weighed heavily on its balance sheet.
The loss at Sibanye, South Africa’s biggest gold producer, comes as its peer Gold Fields, the world’s seventh biggest gold producer, reported yesterday that its profit for the half year to June had tumbled by 54 percent due to a stronger rand.
The rand was 14 percent stronger against the US dollar to R13.24 in the half year to June from R15.39 for the six months ended June 30, 2016.
Harmony However, Harmony Gold had an impressive full year to June, despite the stronger rand, reporting a 35 percent increase in headline earnings to R1.3bn.
Revenue grew 5 percent to R19.2bn. Harmony also announced plans to make acquisitions in order to meet its production targets. It said it also saw benefits from hedging, it reported it had gained R728m on its rand gold hedge in the period.
Harmony chief executive, Peter Steenkamp, said the group had a strong investment case. “Production is safer and more predictable, grade management is disciplined, production delivery exceeds guidance, operations are generating operational free cash flow, and the hedging strategy secures cash margins. Combined with Harmony’s low net debt compared
Sibanye’s profit for the half year to June has tumbled by 54 percent due to a stronger rand.
to peers and its excellent growth opportunities,” he said.
Sibanye’s gold production for the six months ended June 30, 2017, declined by 8 percent to 688 600 ounces (oz). “This was mainly due to the suspension of operations at Cooke 4 during the second half of 2016, the impact of illegal mining at the Cooke Operations and lower volumes and grades from Beatrix West,” the company said.
In June Sibanye suffered an unprotected strike after it barred employees from taking food underground to illegal miners. It said it had lost 300kg of planned gold production, equivalent to about R160m in revenue at the Cooke Operations during the strike.
It dismissed 99 employees and placed 407 employees on final warnings and forfeiting their salaries while a further 869 forfeited annual leave, in order to compensate for non-productive shifts.
Sibanye said it had grappled with once-off items, including a R2.8bn impairment charge, relating to the planned mothball of the loss making Cooke and Beatrix West operations.
Earlier this month, Sibanye announced plans to cut 7 400 jobs at Beatrix West and Cooke Operations, excluding close to 3 000 contractors.
Sibanye said it was taking action to address these under-performing operations, with a section 189 consultations process in line with the law amid the looming retrenchments.
The firm said the losses came after it set aside R1.1bn for the settlement of the silicosis class action, while Harmony said it had made a silicosis liability provision of R917m.
Gold Fields said it expected to pay about $30m to end a class action lawsuit.
Sibanye also said the R402m for the acquisition of the US based Stillwater Mining during the period had also contributed to its loss.
Meanwhile, Harmony which is focused in mining in South Africa and Papua New Guinea, said it would concentrate on its Hidden Valley operations for future earnings growth.
It said management was fully committed to the success of the Hidden Valley investment in Papua New Guinea, demonstrated by the progress made since acquiring 100 percent ownership of the mine, with the stage 5 and 6 project delivery on schedule.
Hidden Valley was expected to produce 180 000oz of gold and 3 million ounces of silver per annum by 2019, Steenkamp said.
The group’s costs increased by 10 percent to $1 182/oz, while capital expenditure surged 68 percent to R3.6bn, of which R1.3bn was spent at Hidden Valley.
Harmony completed the acquisition of Hidden Valley last year when it bought out the 50 percent stake in its joint venture partner Newcrest Mining.
Meanwhile Gold Fields declared an interim dividend of 40 cents a share and maintained its full year performance targets despite lower profits.
Nick Holland, the chief executive of Gold Fields, said its investment initiatives under way would enable the group to maintain its current production profile for the next few years.
“Looking beyond 2017, we believe that we can at least maintain our current production profile for the next 8 to 10 years.
“The benefits of the investments in Damang, Gruyere and South Deep start to come through from 2019 onwards, with production approaching 2.3 million ounces and all-in cost production approaching sub-$900 (R11 917) per ounce,” Holland said.
The company’s profits tanked from $124m recorded in the six months ended June 2016 to $70m for six months ended June. It’s operating profit decreased by 2percent to $627m. Its cash inflow from operating activities decreased from $384m to $276m in the period under review, mainly due to a decrease in operating profit of $32m and tax paid rose from $127m to $196m.
The gold price yesterday climbed by $12.40 in a second day rally to close at a $1285.15 fix at 3pm in London yesterday.