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Sibanye still eyeing platinum: Peter Major – mining specialist, Cadiz Corporate Solutions

Sibanye targets productivity boost from shift changes.

HILTON TARRANT: Sibanye Gold, the top-performing share on the JSE this year– up 113% – hosted a strategic and operational update for investors, analysts and media today.
   The miner also revised its reserves and resources upwards following the acquisition of the Wits Gold and Cooke assets. Based on this, it has extended the planned lives of its Kloof, Driefontein and Beatrix mines as well.
   It also announced that headline earnings per share for the first six months of the year would be more than 20% lower than a year ago. That because of the increase in the number of shares in issue.
   Peter Major is mining specialist at Cadiz Corporate Solutions. Peter, you attended the update today. If you look at the level of detail provided by Sibanye, it’s truly astonishing what’s been achieved in a relatively short space of time.

PETER MAJOR: Ja. Astonishing is a good word just to describe how much information they put together, and manage to run this huge mining complex at the same time, Hilton. Yes, they’ve accomplished a lot. You’ve got to give credit to the team. All these team members are very grizzled veterans. I think one of the least experienced probably has 15 years, and I think most of these people I’ve known for 30 years in the mining industry. So I’ll bet 30 years experience is the average here. They are a great team. They’ve all proven themselves in other mines over the decades, and they knew what needed to be done here. They had a great asset to work with, a very good manager in Neal. He’s good at giving people plenty of latitude to do what needs to be done and giving them direction. And he’s tried to cover them for a lot of the political and labour issues so they can actually get to work mining like they are supposed to.

HILTON TARRANT: Also seeming to start really looking at things differently as far as operations are concerned, some potential changes to how shift work is done mooted for example, different ways of approaching contractors, for example. These are kind of things that perhaps haven’t been tried in the mining sector before and, as you say, a fantastic asset. But at the end of the day, Peter, these are old gold mines.

PETER MAJOR: Ja, they are old gold mines, capex is very limited. Because they are in such a large group all the capex is going to new operations. So these old operations that were the cash cows were churning out money that went into new operations all over the world.
   They are trying new things like shifts, etc, which have been tried – different shifts, different scheduling. That’s been tried for 20, 30 years without much very good effect. And, as he says, “we are going to have pilot trials here”.
   He went to pains to tell the crowd how these big strikes and labour problems they’ve had in the last year-and-a-half set you back at least a year. If you have a big strike for three, four, five weeks, it can put you back a year easily. So they are actually behind by a year from where they wanted to be because of labour problems.

HILTON TARRANT: Peter, what about the much talked-about potential entry by Sibanye into the platinum sector? Was much said about that today?

PETER MAJOR: No, not really. They said we are looking, we are talking to see if there are some great operations, but we only want great opportunities. We don’t have a lot of cash to spend on platinum; we have great projects here. But we are going to keep our eyes open.

HILTON TARRANT: Thanks to Peter Major. David, Peter says the hard work has been done, the turnaround has largely been done in these assets and right now perhaps this Sibanye is at fair value and perhaps right now this is simply a proxy for the gold price.

DAVID SHAPIRO: We are going to see that. If the gold price keeps going down and the rand goes up, there could be that offsetting factor. But he has promised, what’s it, 35% of earnings back in the dividend…

HILTON TARRANT: Somewhere between 25 and 25%.

DAVID SHAPIRO: I think that also could be an attractive reason to get into the market, except that this is depreciating asset – in other words, in like mines. He is not going to expand unless he goes out and finds other areas.

HILTON TARRANT: Well, that’s what they’ve been trying very hard to do. Uranium, potentially…

DAVID SHAPIRO: You are not going to get the Kloofs and the Driefonteins and the Beatrixes back there. I don’t think they’ll be able to replace those assets very easily.

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