Sibanye Gold Ltd. (SGL), the South African miner spun off by Gold Fields Ltd. (GFI) this year, said workers disappointed by the performance of their labor unions are unlikely to strike over wages next week.
A strike is “a most unlikely situation,” Chief Executive Officer Neal Froneman said on a call with analysts and reporters. “Management are the only ones who have delivered on what they said they would do at the operations. There’s a lot of disillusionment around organized labor.”
Gold companies agreed to an 8 percent pay increase with all labor groups except the Association of Mineworkers and Construction Union last month. The AMCU said yesterday it will decide next week whether it should down tools.
The union represents about 19 percent of gold employees at companies belonging to the Chamber of Mines, which speaks for the industry, and 65 percent of workers at Sibanye’s biggest site, Driefontein. Members of the AMCU this week voted to strike at the world’s biggest platinum mine, owned by Impala Platinum Holdings Ltd. (IMP), without saying when the action will start.
Sibanye is confident that the wage accord reached with other unions including the National Union of Mineworkers applies to workers at Driefontein, because the company -- not the mine - - is legally defined as a workplace, Froneman said.
“We’re in a very strong position legally,” he said. “Should they declare a strike, it will be illegal.”
Sibanye’s advanced 4.4 percent to 14.13 rand by 12:29 p.m. in Johannesburg trading after the company said third-quarter operating profit rose 10 percent as production climbed and costs fell.
Operating profit was 2 billion rand ($201 million) in the three months to Sept. 30, compared with 1.8 billion rand in the previous quarter, the Westonaria-based company said today in a statement. Production rose 8.6 percent to 387,800 ounces, while all-in costs declined 9.6 percent to $1,059 an ounce.
Sibanye announced its first dividend of 37 South African cents a share last month after profit and output increased in the first half. The stock had a 7 percent dividend yield on the declaration date, making it then the highest yielding gold mining stock globally, it said in the statement.
Total shareholder returns have outperformed former parent Gold Fields by 55 percent since the two separated in February. The company was formed as a collection of cash-generating South African gold-mining assets, while Gold Fields retained growth mines in Australia, Peru and Ghana.
Sibanye will probably produce about 378,000 ounces of gold at an all-in cost of $1,125 an ounce in the fourth quarter, it said today. That will increase annual production by 5.2 percent to 1.42 million ounces and cut all-in costs by 4 percent to 360,000 rand a kilogram.
The company aims to further boost production and lower costs by mining rock that was previously preserved as support pillars in older mines, if it’s viable and safe to do so. It will also review shift cycles, cut the time miners spend traveling to the rock face, and explore secondary reefs that weren’t mined in the past due to their low grade ore and complexity, according to the statement.
Sibanye generated 811 million rand in cash during the quarter, meaning it now has 2.1 billion rand of cash on its balance sheet. It made two 750 million-rand payments to reduce debt in August and October. Gross debt is 40 percent lower at 2.5 billion rand, compared with the beginning of the year.
The current debt levels mean Sibanye can pay a dividend of as much as 35 percent of 2013 normalized earnings, it said.
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