Sibanye maintains forecasts as interim profit plunges 77%

SIBANYE Gold maintained full-year cost and production forecasts even as the first-half earnings of South Africa’s largest gold producer dropped 77 percent from December after precious metal prices fell.

Headline earnings, which exclude one-time items, declined to R169.6 million in the six months to June 30, compared with R652.2m in the same period in 2014, the company said in a statement yesterday. It will pay an interim dividend of 10c per share.

Sibanye has tumbled 32 percent this year as gold fell to a five-year low and output declined in the first quarter after a series of processing-plant stoppages.

While the company said it had recovered from these incidents in the second quarter, gold had fallen 8.2 percent to below $1 100 (R14 036) an ounce since March 31 on expectations that the Federal Reserve would raise interest rates, reducing demand for the haven asset.

“The general decline in commodity prices to multiyear lows continues to place considerable financial stress on mining companies globally,” the company said.

“While Sibanye is not immune to these macroeconomic factors and faces numerous other challenges, it is able to weather lower gold prices.”

Power usage

The stock rose as much as 2.14 percent and ended trade 0.84 percent higher at R15.55. The five-member gold mining index shed 1.07 percent.

Gold output of 713 900 ounces was little changed from 711 900 ounces a year earlier.

Sibanye lost 8 660 ounces, or the equivalent of R125m in revenue, due to power cuts in the first half, it said.

It had to curtail electricity usage by as much as 20 percent for 344 hours in the three months ended June, compared with 173 hours during the previous quarter, it said.

Eskom is struggling to meet demand for electricity amid delays in the building of new plants and frequent breakdowns of older ones.

“The deterioration in the security of electricity supply, coupled with strong indications that the Eskom tariff trajectory is likely to exceed earlier projections, has further strengthened the business case for developing an independent photovoltaic electricity supply,” the company said.

“Our target date for first generation from a first phase of the envisaged 150 megawatt installation remains towards the end of 2017.” – Bloomberg