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Sibanye counts hit to earnings as strike at gold mines drags on

The gold producer remains under pressure to reduce debt.

Sibanye Gold said a protracted strike at its South African gold mines may hurt earnings at a time when the producer remains under pressure to reduce debt.

Thousands of workers started a strike in November over pay, and there’s inconsistent output at three mines amid limited operations, spokesman James Wellsted said, without saying how many workers are showing up. Sibanye is assessing the impact on its finances, he said. While the strike won’t force a restructuring of the affected mines, there could be a review if the impact is severe, he said.

“There will be an impact on revenue,” Wellsted said. “There is some production taking place, and obviously we try to ensure we produce as much as possible, but it’s not consistent.”

Workers allied to the Association of Mineworkers and Construction Union started a strike on November 21 and the union has vowed to continue with the stoppage after refusing a wage deal agreed to by three other unions. Any hit to earnings would hurt Sibanye’s plans to cut debt, which swelled during an acquisition spree. The company’s shares dropped 34% last year amid concerns about borrowings and and an increase in fatal mining accidents.

The biggest gold producer in South Africa can’t afford a prolonged production hiatus at its gold operations even though a rally in palladium has provided some cushion, said Hurbey Geldenhuys, an analyst at Vunani Securities.

“Sibanye can’t absorb losses from its gold business for a protracted period,” Geldenhuys said. “Gold business earnings have been under pressure for some time, but its exposure is now much smaller so the impact won’t be as severe as it would have been.”

© 2019 Bloomberg L.P
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