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Sibanye Gold mulls cutting ties with Eskom

Feb 19 2015 12:16

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Company Data

GOLD FIELDS LIMITED [JSE:GFI]

Last traded 81
Change -4
% Change -4
Cumulative volume 5777113
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

Sibanye Gold Limited [JSE:SGL]

Last traded 24
Change 0
% Change 2
Cumulative volume 3896397
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg - Sibanye Gold [JSE:SGL], the biggest producer of the metal in South Africa, intends to become energy-independent “over the next few years” as state utility Eskom struggles to supply the economy with enough power.

The company is considering investing in solar power and building its own coal-fired plants of 200 megawatts to 600 megawatts to reduce reliance on “inconsistent and increasingly expensive” electricity, the Westonaria, South Africa-based company said in a statement on Thursday.

The investment in solar power would cost about R3bn ($258m) and generate 150 megawatts, Sibanye said. The company’s overall demand is 500 megawatts, it said.

Eskom, which generates about 95% of electricity used by Africa’s second-biggest economy, is struggling to meet demand after it failed to adequately invest in generation in the 20 years following the country’s first democratic elections. The utility requires industrial users to cut consumption by as much as 20% when it’s running short of power. Residential consumers have had 11 days of load shedding this month.

“Ongoing delays at Eskom’s new capacity-build projects and a lack of critical maintenance at its existing stations has resulted in regular supply interruption, which is likely to continue for the foreseeable future,” Sibanye said.

The company’s power costs will swell to 20% of overall expenditure in 2015 from about 9% in 2007, a year before the country had power shortages that idled mines and smelters for five days.

Profit increase

The company’s so-called headline earnings rose 14% to $69.7m in the six months through December from the preceding six-month period, it said on Thursday. Gold production increased 23% in the six-month period to 877 400 ounces. For the full year, headline profit declined 46% to $130.9m from 12 months earlier.

READ: Sibanye Gold ups dividend, earnings fall

Sibanye, a collection of aging but cash-generative South African mines, is the third-best performer on the FTSE/JSE Africa All-share index this year, having risen 36%. The company has cut costs and increased production by mining more efficiently and buying nearby resources since it was spun out of Gold Fields [JSE:GFI] in 2013.

Sibanye will pay a second-half divided of 62 SA cents a share, bringing the total annual payout to 112c a share, it said. That means R1bn was returned to shareholders in 2014, it said.

sibanye gold  |  eskom  |  load shedding  |  energy
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