Sibanye Gold Hits Record High as Dividend Beats Estimates

  • Earnings for 2015 drop on disruptions, better 2016 forecast
  • Company ends Waterberg Coal talks; evaluating opportunities

Sibanye Gold Ltd., the biggest producer of South African bullion, rose to a record high in Johannesburg trading after declaring a dividend that beat analysts’ estimates.

Sibanye will pay 0.9 rand ($0.06) a share for the second half of 2015, bringing the total payout for the year to 1 rand a share, the company said in a statement Thursday. That beat the 0.65 rand a share full-year forecast by 12 analysts surveyed by Bloomberg.

“The dividend was ahead of estimates but the outlook is also very positive,” Richard Hart, a Johannesburg-based analyst at Arqaam Capital, said by phone. “There’s a lot of cash coming out of this company at spot prices.”

Sibanye, spun out of Gold Fields Ltd. in 2013 with three aging South African gold mines, has been cutting workers and lowering costs, leaving it well-placed to take advantage of a gold price that’s up 16 percent this year and a weaker rand, in which it pays costs. The local currency has declined 27 percent against the dollar in the past year, widening local producers’ profit margins.

The stock rose as much as 9.5 percent to 56.93 rand, a record high, and traded up 7.4 percent at 1:07 p.m. in Johannesburg.

Production Estimate

Sibanye aims to produce 1.61 million ounces of gold in 2016 with all-in sustaining costs of 425,000 rand a kilogram. Bullion traded at 624,270 rand a kilogram Thursday.

That means the company would generate 10 billion rand of free cash flow in 2016, according to Hart.

If the gold price persists at these levels this year, the group’s total cash-cost margin will increase to about 38 percent while the all-in sustaining-cost margin will be about 25 percent, the company said.

Earnings excluding one-time items were $52.9 million in 2015, compared with $130.9 million a year earlier, Sibanye said. Production fell 3.4 percent to 1.54 million ounces as all-in sustaining costs dropped 3.7 percent $1,031 an ounce.

The company faced production obstacles during 2015 and the gold price was an average 8.3 percent lower than in 2014. First-quarter output fell 5.2 percent from a year earlier after a series of processing-plant incidents and conveyor problems at its Kloof mine. In the third quarter, there were two fires at Kloof and seismic activity at Driefontein.

Power Supply

The company wants to cut reliance on power from state-owned supplier Eskom Holdings SOC Ltd., which requires large users such as Sibanye to cut usage by as much as 20 percent when the utility is short and implements managed blackouts, which happened on more than 100 days last year.

The producer said its 150-megawatt photovoltaic power plant should generate its first electricity toward the end of 2017.

Sibanye terminated talks to gain control of Waterberg Coal Group, it said in a separate statement.

Before it's here, it's on the Bloomberg Terminal.