New reserves prolong Sibanye’s life-of-mine beyond 2027

SIBANYE Gold’s economically extractable gold mineral reserves stood at just under 20 million ounces, a 46 percent increase over its previous estimate, the JSE-listed gold producer said yesterday.

The company’s share price leapt on the news, rising as much as 4.9 percent after the 2pm announcement. The shares ended 3.19 percent up at R20.40, outperforming the JSE’s gold mining index, which gained 0.8 percent.

The lifting of Sibanye’s estimate means the timeline for its operations, or life-of-mine, will be prolonged beyond the group’s latest forecast of 2027, though a new date has yet to be given. The “increase in mineral reserves will significantly enhance and extend Sibanye Gold’s life-of-mine production profile”, it said ahead of its interim results on Thursday.

“This is based on assessments of previously unmined areas, and because of our reduced cost base, more of the reserves can be economically extracted,” spokesman James Wellsted said.

The company’s cost base has been slashed in the year since it was spun off from Gold Fields. It has cut its workforce to 35 000 from about 42 000, which has made it commercially viable to mine deposits that are harder to reach.

Wellsted said Sibanye could not say exactly how long its life-of-mine profile would be extended, but it “would be able to produce 1.2 to 1.4 million ounces” a year well beyond 2027.

Sibanye is based exclusively in South Africa and any extension to its operations would be a rare piece of good news for an industry that has produced a third of the bullion mined but long been in a state of decline.

According to the World Gold Council, South Africa accounted for almost 80 percent of global bullion output in 1970 but now only churns out about 6 percent to 7 percent.

The recent decline of the gold price, which shed 28 percent last year in its biggest annual fall in three decades, has raised further questions about the viability of an industry which has also been rocked by bouts of labour unrest.

Sibanye’s extension is also of interest because it has positioned itself as a company with mature assets that can generate solid dividends. The JSE-listed firm said its production profile had been boosted by the 46 percent increase in mineral reserves to 19.73 million ounces at year end from 13.53 million ounces a year earlier.

Gold mineral reserves at Beatrix rose by 8 percent to 3.63 million ounces. At Drie- fontein, reserves rose by 39 percent to 6.06 million ounces.

Mineral reserves at Kloof increased by 4 percent to 6.02 million ounces mainly as a result of detailed investigation into the economic potential of white areas that were not previously considered and a secondary reef that became available following a 15 percent decrease in the overall pay limit.

The West Rand tailings project had reserves of 4.02 million ounces that were not previously recognised. Additional reporting by Dineo Faku