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Sibanye shares tank as core profit tumbles

Nov 01 2018 14:53
Khulekani Magubane, Fin24

Sibanye Gold's [JSE:SGL] share price tumbled on Thursday following the release of its operating update the same morning, which showed adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) falling 40% to R1.6bn from R2.7bn a year earlier.

Production at its gold mines in SA also fell 24% from the previous year.

By 13:04, the share price had sunk 12.04% to R9.01, against a 52-week high of R19.78. By 14:37 Sibanye shares were changing hands at R9.40 a share, down 8.2% on the day.  

In its statement, Sibanye said it had maintained a solid performance.

However, it said challenges experienced in the first half of the year were continuing to impact performance in the second half, and costs had been on the rise.

" The significant operational challenges experienced at the SA gold operations during H1 2018, and the additional safety improvement interventions undertaken, continued to affect productivity across the gold operations in Q3 2018, with Driefontein in particular delivering at substantially reduced production rates.

"As a result, adjusted EBITDA from the SA gold operations for Q3 2018, was substantially lower than for the comparable period in 2017, with AISC [all-in sustaining costs] significantly elevated."

Sibanye has faced mounting criticism in 2018 over safety standards at its mines, with over 20 fatalities at Sibayne-Stillwater operations in this year alone.

However, it added, the company had improved safety standards, citing 2.7 million fatality-free shifts.

Further challenges include ongoing wage negotiations with unions, as well as two purported class-action lawsuits in the United States District Court for the Eastern District of New York – one against group CEO Neal Froneman and one against group CFO Charl Keyter – for alleged violations of US securities laws.

Meanwhile, the proposed Lonmin acquisition is facing a delay of approximately one month as the recommended hearing with the Competition Tribunal has been deferred from mid-October to mid-November.

In more positive news, platinum group metals from the contribution of PGMs from Southern Africa and the US to group adjusted EBITDA grew to 85% from 49% in the same period a year earlier, with gold making up 15% of adjusted EBITDA.

A more conducive precious metals and commodity price environment in September 2018 has been sustained in Q4, Sibanye added, as general market confidence in the outlook for precious metals and commodities overall has improved.

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