Sibanye hopes solar power will cut reliance on Eskom

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Bloomberg

Sibanye Gold intends to get as much as 15 percent of its energy from solar power to cut reliance on Eskom for electricity supplies to its mines.

The company was completing a study on the project and aimed to share the outcome with investors in about a month, chief executive Neal Froneman said yesterday.

Solar energy would provide 10 percent to 15 percent of Sibanye’s power needs.

“The focus on solar was more to reduce our dependence on Eskom because of its unreliability rather than getting costs down,” Froneman said. “But, if Eskom continues with the sort of increases it has been implementing, it will be a more economical alternative.”

Eskom, which provides almost all of South Africa’s electricity, is struggling to meet a target of maintaining 15 percent more supply than demand as it contends with aging equipment and delays in the construction of plants. Sibanye was among mining companies asked to reduce energy use in November last year as Eskom declared an emergency power shortage.

The gold producer, spun off from Gold Fields last year, was working with Chinese suppliers and financiers on the solar project, Froneman said. “The model involves Chinese financing with Chinese solar panels and a commitment from us” to buy them.

Sibanye agreed last year to buy a majority stake in the Cooke operations of Gold One International, which is owned by Chinese consortium BCX Gold.

Sibanye posted a 53 percent gain in headline earnings to $147.5 million (R1.6 billion) in the six months to December, from $96.1m in the first half, it said yesterday.

The year’s profit numbers could not be compared with 2012 because the company was only formed in February last year, Froneman said.

Production climbed 18 percent to 773 600 ounces and all-in costs dropped 18 percent to $1 043 an ounce from the first to second half.

“Our focus has always been to implement our new operating model, which essentially involves getting costs down. Fifty percent of our costs are related to people. There’s been a lot of restructuring on that side.”

Job losses

Sibanye reduced its workforce by 5 300 to about 36 000 during the year and cut about 1 800 contractors, Froneman said, adding that the job losses had mainly been voluntary and affected management as well as lower-level employees.

Gold Fields spun off most of its South African mines to create Sibanye. While the move was aimed at insulating Gold Fields from strikes, low productivity and short mine lifespans, the company has declined 49 percent in the past year on the JSE, while Sibanye has advanced 50 percent after attracting investors with its dividend payments.

Sibanye gained 0.63 percent to close at R20.63 on the JSE yesterday.

Sibanye would pay a dividend of 75c a share for the six months to December, resulting in a total payout of R1.12 a share for the year, the company said. That gives a dividend yield of 5.5 percent, based on the stock price close on Tuesday.

Froneman, with fellow gold chief executives, negotiated a two-year pay deal with unions in September last year that has brought more stability to the industry, in contrast to platinum producers, most of whose workers have been on strike since January 23.

He has also cut costs, making lower-grade gold economically viable.


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