Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Shares in Sibanye Gold (JSE:SGL) (NYSE:SBGL), South Africa’s largest producer of the precious metal by output, dropped as much as 12% in Johannesburg Thursday after it revealed that safety stoppages hurt output in the first half of the year.
First-half profit increased by 85% to 333 million South African rand ($23.7 million) on a 44% rise in revenue to 14.71 billion rand.
“If everything had gone right, we know that’s highly unlikely, there’s 1.4 tons of additional gold that we could have produced had we not had the disruptions,” chief executive officer Neal Froneman said in an interview with Bloomberg. “That would have resulted in much better revenue and costs.”
But those ones were one of the very few bad news delivered by the company, which reported a significant increase in first-half profit — it went up by 85% to 333 million South African rand ($23.7 million) on a 44% rise in revenue to 14.71 billion rand.
The gold and platinum miner also hiked its first-half dividend to 85 rand cents a share, up from 10 rand cents a share in the same period last year.
Even with stoppages, gold output increased 4.6% to 746,800 ounces in the first half, said Sibanye, which kept its forecast for full-year gold production at 1.6 million ounces even as it is in the midst of deciding what to do with the Cooke 4 shaft.
Platinum mines in limbo
The miner’s platinum operations, which generated a record 92,773 ounces of platinum group metals (PGM) in the second quarter, are expected to produce 260,000 ounces in the nine months to Dec. 31, the company said.
However, Sibanye revealed that production losses and prevailing low PGM prices are a present threat to the future viability of some of its operations.
Beatrix 3, a gold mine in the Free State province, is also being “carefully watched”, said Sibanye.
“Sibanye is currently assessing the current operational and financial situation at its Platinum Division, which may require remedial action,” it said in today’s statement.
The miner added that Beatrix 3, a gold mine in the Free State province, was also being “carefully watched”.
In October last year, the company bought nearby mines owned by Australia’s Aquarius Platinum Ltd., which has operations in South Africa and Zimbabwe. The $294 million deal was completed in April.
The firm, which was spun off from Gold Fields in 2013, said its plans to acquire more operations this year were beginning to evaporate following an improvement in the commodity market sentiment. Instead, Sibanye said it would favour growth where synergies and cost savings were on offer.
Courtesy of Sibanye Gold.
