Sibanye Gold Ltd. (SGL) intends to get as much as 15 percent of its energy from solar power to reduce reliance for electricity supplies to its mines from South Africa’s state-owned Eskom Holdings SOC Ltd.
The company is completing a study on the project and aims to share the outcome with investors in about a month, Chief Executive Officer Neal Froneman said today in a phone interview. 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 more 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 having 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 as Eskom declared an emergency power shortage.
The gold producer, spun off from Gold Fields (GFI) Ltd. last year, is 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, Froneman said.
Sibanye last year agreed to buy a majority stake in the Cooke operations of Gold One International Ltd., which is owned by Chinese consortium BCX Gold.
Sibanye posted a 53 percent gain in headline earnings, which exclude one-time items, to $147.5 million in the six months ended Dec. 31, compared with $96.1 million in the first half, it said today in a statement. This year’s profit numbers can’t 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 in the period.
“Our focus has always been to implement our new operating model which essentially involves getting costs down,” Froneman said. “Fifty percent of our costs are related to people. There’s been a lot of restructuring on that side.”
Sibanye reduced its workforce by 5,300 to about 36,000 in the past year and cut about 1,800 contractors, Froneman said. The job losses have mainly been voluntary and affected management as well as lower-level employees, he said.
Gold Fields spun off most of its South African mines to create Sibanye in February 2013. 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 in Johannesburg trading, while Sibanye has advanced 50 percent after attracting investors with its dividend payments.
Sibanye fell 1.5 percent to 20.20 rand by 10:24 a.m. in Johannesburg. The FTSE/JSE Africa Gold Mining Index traded 3.2 percent lower.
Sibanye will pay a dividend of 75 South African cents (7 cents) a share for the six months ended Dec. 31, resulting in a total payout of 1.12 rand a share for the year, the company said. That gives a dividend yield of 5.5 percent, based on the stock price at Feb. 18, it said.
Froneman, with fellow gold CEOs, negotiated a two-year pay deal with unions in September that has brought more stability to the industry, in contrast to South Africa’s platinum producers, most of whose workers have been on strike since Jan. 23.
He has also cut costs, making lower-grade gold economically viable. The company on Feb. 17 said reserves that can be mined profitably increased 46 percent to 19.7 million ounces.
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