Sibanye Sees Gold Output Over 1 Million Ounces for 12 Yearsby
Project investments to extend gold unit’s life beyond 2040
Rustenburg, Kroondal combination sees 800 million rand savings
Sibanye Gold Ltd., the biggest South African producer of the metal, said investments in its operations mean it will maintain output at more than 1 million ounces annually for at least 12 years.
About 3.6 billion rand ($253 million) of spending on its Kloof, Driefontein and Burnstone mines that the board approved last year will result in more than 4 million ounces of extra gold output and extend the life of the mines beyond 2040, the Westonaria, South Africa-based company said in a statement Thursday.
"We’ve created life and sustainability" by approving new projects to change resources into reserves,” Chief Executive Officer Neal Froneman told reporters and investors at Kloof, west of Johannesburg. “You don’t get a constantly increasing cost base” as mines get smaller and wind down, he said. The extension and infrastructure projects exceed Sibanye’s 15 percent hurdle rate after tax and inflation and have internal rates of return of 20 to 30 percent.
Sibanye shares have more than doubled this year and climbed 5.9 percent to a record 67.67 rand at 9:23 a.m. in Johannesburg. The twin boost of higher gold prices and a weaker rand, in which it pays costs, have helped widen profit margins and turn the producer’s aging, previously high-cost operations into mines that are on course to generate 10 billion rand of free cash flow this year.
Formed through the spinoff of three old South African mines from Gold Fields Ltd. in 2013, Sibanye has focused on cutting costs and paying dividends at a time when many rivals have been preoccupied by repaying debt. Last year, it agreed to buy four platinum mines near Rustenburg, west of Johannesburg, to increase its precious-metal reserves and prolong its lifespan.
The Rustenburg operations, which Sibanye is buying from Anglo American Platinum Ltd., and the Kroondal mine, which was part of Aquarius Platinum Ltd., are next to each other and will deliver about 800 million rand of annual cost savings within four years of the transactions being completed.
The combination of the assets will see Sibanye becoming the world’s fifth-largest producer of platinum-group metals. The company expects the purchase of the Rustenburg mines to be concluded in the latter half of this year.