Zim­bab­weans look for greener pas­tures in SA

Ex­pec­ta­tion of a solid op­er­a­tional per­for­mance of its lo­cal and US plat­inum group met­als

Pretoria News - - FRONT PAGE - DINEO FAKU [email protected]

SIBANYE Still­wa­ter’s share price yes­ter­day strength­ened more than 5 per­cent on its ex­pec­ta­tion of a solid op­er­a­tional per­for­mance of its lo­cal and US plat­inum group met­als (PGM) op­er­a­tions de­spite the pro­tracted strike at its gold op­er­a­tions that have claimed four lives.

The group, which has re­ceived reg­u­la­tory ap­proval to ac­quire Lon­min, the world’s third-largest plat­inum pro­ducer, told in­vestors yes­ter­day that its PGM op­er­a­tions had ac­counted for about 74 per­cent of ad­justed earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion in the first half of last year.

“The strate­gic ben­e­fits of the group’s com­mod­ity and geo­graphic di­ver­si­fi­ca­tion are clearly ev­i­dent, with op­er­a­tional dis­rup­tions in the gold di­vi­sion off­set by ris­ing PGM prices and the solid op­er­a­tional per­for­mance of the PGM op­er­a­tions,” the com­pany said in its strate­gic up­date.

Sibanye ex­pects higher bas­ket prices, to bode well for rev­enue at its US PGM op­er­a­tions and for lo­cal PGM op­er­a­tions to con­tinue op­er­at­ing well.

Sibanye said the pal­la­dium price had in­creased by more than 75 per­cent from $74 (R1 029) an ounce to more than $1 300 an ounce, since it an­nounced the ac­qui­si­tion of the US-based plat­inum as­set Still­wa­ter as­set in De­cem­ber 2016.

It said 4E PGM pro­duc­tion at its lo­cal op­er­a­tions for 2018 would likely be about 1.17 mil­lion ounces, ahead of tar­gets, while the ro­bust pal­la­dium and rhodium prices to­gether with the weaker rand/dol­lar ex­change rate, had boosted the rand 4E PGM bas­ket price by 19 per­cent in 2018.

Seleho Tsatsi, an in­vest­ment an­a­lyst at Jo­han­nes­burg An­chor Cap­i­tal, said the strength in PGMs, par­tic­u­larly pal­la­dium, was a ma­jor tail­wind for Sibanye.

“Gold prices have also held up rel­a­tively well, per­haps as in­vestors as­sess the pos­si­bil­ity of fewer than ex­pected rate hikes from the Fed go­ing for­ward which makes gold more ap­peal­ing com­par­a­tively,” he said.

Sibanye has had to re­vise its pro­duc­tion tar­get for gold due to the strike, with gold pro­duc­tion ex­pected to fall mod­estly to 1.1 mil­lion ounces, which were below the pre­vi­ous guid­ance of be­tween 1.13 mil­lion and 1.16 mil­lion ounces for the year due to the strike.

Four peo­ple have died and sev­eral oth­ers have been in­jured in vi­o­lent in­ci­dents in the As­so­ci­a­tion of Minework­ers and Con­struc­tion Union-led strike since Novem­ber 21.

The com­pany said it had taken sev­eral mea­sures to buf­fer the ef­fects of the strike from re­de­ploy­ing em­ploy­ees re­port­ing for work to spe­cific pro­duc­tion ar­eas to re­duc­ing min­imis­ing over­head costs by shut­ting down ven­ti­la­tion and re­frig­er­a­tion to ar­eas that were not op­er­a­tional.

It said the no-work no pay prin­ci­ple ap­plied with wages gen­er­ally ac­count­ing for around 50 per­cent of op­er­at­ing costs at the deep level gold mines.

Ian Cruick­shanks, a se­nior econ­o­mist at the SA In­sti­tute of Race Re­la­tions, said that PGMs were Sibanye’s “sal­va­tion’’.

He also said con­tin­u­a­tion of the strike at its gold mines signalled that pro­duc­tion would de­cline.

“The strike is still on­go­ing, and al­though the com­pany has stock­piled ore the stock­piles are likely to be a de­cline in due course,” he said.

Sibanye’s share price gained 3 per­cent on the JSE yes­ter­day to close at R10.97

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