JOHANNESBURG - Sibanye Gold announced a capitalisation issue instead of a cash dividend for shareholders in the six months to June as it swung to a loss and debt climbed.
Sibanye chief executive Neal Froneman said the payment of cash dividends was deemed “inappropriate” until leverage was reduced. Froneman said the board had instead resolved to issue shareholders two capitalisation shares per 100 held in line with the company’s approach to deliver superior returns to shareholders.
“We are cognisant of our track record of paying industry-leading dividends, with the approximate average annual dividend of 5% over the last four years, well ahead of our peers,” Froneman said.
Sibanye was established after Gold Fields unbundled its ageing South African gold mines with a conviction to pay shareholders significant dividends.
Mining analyst at Noah Capital Markets Rene Hochreiter said the capitalisation issue was a step in the right direction. “It is better to do a capitalisation issue if you have debt. You do not want to borrow money from a bank to pay shareholders a dividend,” said Hochreiter.
Sibanye posted a R4.8 billion loss during the period compared to a profit of R88.1 million for the same period last year. Net group debt (excluding Burnstone) hit R22.09bn following the $2.2bn (R28.64bn) acquisition of Stillwater Mining Company, the US based platinum metals producer.
The company said the Stillwater transaction had placed it among the top three global producers of both platinum and palladium as Stillwater had a 3:1 palladium-to-platinum ratio, with many forecasters expecting the price of palladium to exceed the price of platinum by year end.
Sibanye impaired R2.8bn against its loss making Cooke and Beatrix West mines, and made a R1.1bn provision for the possible settlement with mineworkers who contracted silicosis at its underground mines. It also recorded R402m in costs owing to the Stillwater transaction.
Earlier this month Sibanye announced it had begun consultations with organised labour which would lead to possible termination of production at the operations and a loss of 7400 jobs.
Froneman said that the under-performance of the assets significantly affected the results for the local gold operations, adding that without these operations the costs would have been R25000 a kilogram lower.
Production during the period was 8% lower than the comparable period last year at 21418kg.
Sibanye said production tanked primarily because of the suspension of operations at Cooke 4 during the second half of 2016, the impact of illegal mining at the Cooke Operations, and lower volumes and grades from Beatrix West.
Sibanye announced six fatalities across South Africa during the first half of 2017 compared with eight in the previous year.
Sibanye said it had rebranded to Sibanye-Stillwater, which it believed better captured the company’s international profile.
Sibanye shares declined 4.89% on the JSE yesterday to close at R20.82.