JOHANNESBURG – Sibanye-Stillwater yesterday plummeted nearly 10 percent on the JSE as investors ditched its stock following confirmation that the escalating death toll at its mines had eaten into its profit.
The miner said lower production from its gold operations and the deferral of sales in the third quarter resulted in a 40 percent decline in its earnings before interest, tax, depreciation and amortisation (Ebitda) to R1.629 billion compared with the third quarter of last year.
Sibanye, which is valued at R23bn, closed 9.67percent lower at R9.25.
Sibanye said capital expenditure for gold was now forecast at about $230 million.
Chief executive Neal Froneman said production had plunged 24 percent to 284 600 ounces in the quarter on the back of fatalities in its gold mines.
Froneman said the ongoing rehabilitation of shafts at Driefontein Masakhane mine following seismic events coupled with the suspension of underground mining at the Cooke operations late last year also contributed to the production slide.
He said the tragic safety incidents in the first half of the year had a significant and continuing effect on production, compounded by losses in areas affected by seismic events.
“The ongoing effects and the trauma caused by the first half safety incidents have been more severe than anticipated resulting in 2018 annual guidance being revised accordingly.”
Froneman cut the company’s gold production guidance for this year to between 1.13 million and 1.16 million ounces from between 1.17 million and 1.12 million ounces forecast previously.
Sibanye has been at the centre of increased mining fatalities in South Africa. The death toll at its platinum and gold operations stands at 24, and the company accounted for half of the fatalities in the mining industry.
Froneman, however, remained bullish about the company’s gold assets despite the losses, saying there was real value in the gold business.
“I remain hopeful gold will get back on a position of Ebitda and will not be a drag on the share price.”
Sibanye said the lower production had resulted in a 20 percent spike in unit operating costs to $1 097 an ounce at the gold operations excluding DRDGold.
Sibanye was established after Gold Fields spun off its ageing gold mines in 2013. The company is in the process of acquiring ailing Lonmin, the world’s third-biggest platinum producer.
Rene Hochreiter, an analyst at NOAH Capital Markets said the performance of the company’s gold division was in line with expectations.
“There are no surprises here. Everybody knew that the gold division was not going to do well in the third quarter. However, the platinum division is alright,” said Hochreiter.
Sibanye said local platinum group metals (PGM) operations for the third quarter were relative at 305 227 ounces compared with 306 184 ounces in the third quarter of last year.
The company expected production at platinum operations to be in line with previous forecast of 4E PGM production of between 1.1 million and 1.15 million ounces.