Sibanye Gold CEO Neil Froneman was oozing with confidence when reporting yesterday the company’s first set of interim financial despite the worrying direction of the gold price.
The markets seem to be sharing Froneman’s confidence, at least over the past few days, and pushed Sibanye’s share price up by about 6% yesterday.
This is remarkable given the fact that Sibanye was unbundled out of Gold Fields and given South African assets which may be described as largely matured. Gold Fields went off with the South Deep project and foreign mines in Ghana, Peru and Australia.
Last year’s unbundling of Gold Fields gave birth to a relatively empowered Sibanye Gold with veteran executive Sello Moloko installed as chairman of the board.
Sibanye’s results for the six months ended June came to defy any pessimism that may have existed around the company.
Gold production for the six months ended 30 June 2013 was 23% higher at 20,413kg (656,300oz), than in the six months ended 31 December 2012. Total cash cost of R289,031/kg (US$983/oz) and Notional cash expenditure (NCE), which includes capital expenditure, of R359,114/kg (US$1,221/oz), 12% and 16% lower respectively. Management attributed this to a greater focus and control at the operational level, and the initial benefits from the implementation of Sibanye Gold’s new operating strategy.
The company said despite a sharp fall in the gold price since mid-April 2013, Sibanye Gold generated an operating profit of R3.3 billion (US$363 million) for the six months ended 30 June 2013 which is 63% higher than in the previous six months ended 31 December 2012. Net cash generated for the period was R1.8 billion (US$197 million).
The company said the first quarter of 2013 was affected by a number of material operational disruptions (the fire at Beatrix West Section and the Driefontein power outage) but the second quarter, which began to benefit from the new Sibanye Gold operating strategy, was significantly better.
Beaming confidence Froneman “It is pleasing to note that the improving operational trends evident in the second quarter of 2013 have continued into the third quarter. We are beginning to arrest the historical declining production and increasing cost trends that have historically plagued these assets.”
“I remain bullish on the future and sustainability of Sibanye Gold. There is no doubt that the Company is made up of world-class assets both in terms of the people and the ore body.”
“The operating and financial results for the period under review are pleasing and support my belief that these assets, despite having been in operation for many decades, are still some of the best gold mines in the world and, will continue to be so for many years to come.”