New positive wind blowing through South African mining – Sibanye

WESTONARIA (miningweekly.com) – A new positive wind is blowing through South African mining with government and industry engagement taking a turn for the better, Sibanye CEO Neal Froneman said on Thursday.

Updating visiting mining analysts and journalists on strategy during the first of two investor days, Froneman remarked that the positive interaction to avoid the ratings downgrade had extended to the minerals sector, where new Mineral Resources Minister Mosebenzi Zwane was surprising the industry on the upside.

He expressed Sibanye’s commitment to the modernisation of the mining industry and disclosed that the company's significant expenditure on research and development had the high level support of the Mining Phakisa, the government-led initiative to boost the resources sector.

“We do find that there are areas of government that are very receptive to the advances being made by the mining industry,” he responded to Mining Weekly Online during question time.

Sibanye outlined at the investor conference that the company had gold projects in development with a post-tax net present value (NPV) of R7-billion at a gold price of R600 000/kg.

Sibanye has delivered a total share price return of over 400% since listing and a compound yearly total shareholder return of 55% over the last three years.

It also outlined to analysts and journalists that its recently acquired platinum assets were positioned to deliver value in the medium term.

Since its listing three years ago, Sibanye has reduced costs and increased production at the Beatrix, Driefontein and Kloof mines that it acquired from Gold Fields.

Separately acquired last year were the Cooke surface and underground operations on the West Rand, and Wits Gold.

With the acquisition of the Burnstone gold project for a mere R70-million, the South Africa-focused Sibanye now has a presence across the entire Witswatersrand basin.

As Sibanye outlined to visiting analysts and journalists, its strategy resulted in production from the gold division increasing to 1.5-million ounces in 2015, with gold reserves rising to 31-million ounces, which placed the company in the top ten gold producers globally, where it also has a lower-quartile all-in sustaining cost position.

Froneman drew attention to the company’s cash generative gold operations opening the way for it to have one of the lowest financial gearing positions globally which has enabled it to pay shareholders an industry leading dividend consistently since 2013.

Since listing, the company has delivered a total shareholder return of more than 400%, giving a compound annual growth rate of 55% a year.

The company is investing R3.6-billion in organic growth projects, which include below infrastructure depth extensions at Kloof and Driefontein and a revised development plan at Burnstone.

These will add more than four-million ounces of additional gold production and extend the gold division’s life-of-mine beyond 2040.

More importantly, Sibanye expects to maintain gold production at more than one-million ounces of gold a year until 2028.

All of the projects exceed an after-tax project hurdle rate of 15% at 2015’s R450 000/kg gold price.

At the year-to-date gold price of more than R600 000/kg the projects have internal rates of return of between 20% and 30%.

Offering an early environmental rehabilitation solution to the West Wits mining region is the West Rand Tailings Retreatment Project, a long-life surface tailings retreatment project with reserves of 10.3-million ounces of gold.