Sibanye drops on reduced production

SIBANYE Gold fell as much as 7.11 percent to trade at R38.79 a share at the close on the JSE yesterdayafter the bullion producer lowered its production guidance for the year to December.

Sibanye reduced the guidance following disruptions that rocked its Driefontein mine, fatalities and the impact of the shut down of Cooke 4 operation last month.

The Westonaria-based company, which was included in the JSE Top40 index last month, downgraded its annual gold production guidance for this year to 1.71 million ounces (48.5 tons) from a previous forecast of 1.76 million ounces at a total cash cost of about R380 000 a kilogram.

Sibanye chief executive Neal Froneman said in the operational report for the September quarter that gold output was 382 500 ounces, which was similar to the previous quarter, but 7 percent lower than for the same period last year.

“Driefontein experienced various production disruptions this quarter, specifically at its Masakhane and Hlanganani shafts. Stoppages related to engineering issues, resulted in underground gold production declining to 111 500 ounces,” Froneman said.

Cooke 4 underground production ceased last month, and output from the Kloof mine improved to 116 300 ounces from 101 900 ounces in last year’s September quarter.

Unchanged The Beatrix Mine’s underground gold production of 78 400 ounces was unchanged from the previous quarter, but lower underground grades and volumes meant it was 11 percent lower year on year.

Sibanye’s announcement that earnings a share for this year would likely be a minimum of 237 cents or 200 percent higher than the 79c reported last year also weighed heavily on the share price yesterday as it was most likely to be lower than analysts’ consensus forecast. Analysts have a forecast range of between 345c to 698c per share and a mean estimate of 482c.

The company said it expected the earnings to jump by at least 300 percent to 237c for the year to December.

Sibanye said that operating profit for the gold division rallied by 59 percent to R2.5 billion in the September quarter, with the operating margin increasing to 36 percent from 27 percent, on the back of the 27 percent higher price of gold in rands.

Group operating profit increased by 71 percent to R2.7bn in the September quarter, driven largely by a higher rand and dollar gold price, and good cost management at both the gold and platinum divisions.

Earnings update Sibonginkosi Nyanga, an analyst at Momentum SP Reid, said the market was most probably disappointed by the company’s earnings update.

“The 237c per share for the year to December 2016 falls short of what the market is expecting, it is only half of the mean forecast of 482c per share,” he said.

“In most cases missing an earnings target triggers a large and disproportionate negative stock price response,” Nyanga added.