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Sibanye Gold output falls as platinum beats expectations

The company says its liquidity ‘remains sound’ with major repayments due from mid-2022.

Sibanye Gold said output fell to 1.1 million ounces of gold in 2018 as a strike at three mines in South Africa shows no sign of ending. However, platinum-group metal production was higher than forecast.

South Africa’s largest gold producer previously forecast between 1.13 million ounces and 1.16 million ounces, down from 1.4 million ounces in 2017. Despite the setback of strikes and lower production, the company said its liquidity “remains sound” with major repayments due from mid-2022.

Key insights

Thousands of workers allied to the Association of Mineworkers and Construction Union started a strike on November 21, and the union has vowed to continue the stoppage after refusing a wage deal agreed to by three other labor groups. The action has resulted in four fatalities and several injuries due to violence, Sibanye said in a statement Thursday. Workers tied to rival unions have been targeted by AMCU members, with some houses burned down, the National Union of Mineworkers said earlier this week. Despite setbacks at the gold operations, Sibanye’s PGM operations in South Africa are benefiting from a higher rand-basket price. Group production for 2018 is seen ahead of forecast at 1.17 million ounces.

“The strategic benefits of the group’s commodity and geographical diversification are clearly evident, with operational disruptions in the gold divisions offset by rising PGM prices and the solid operational performance of the PGM operations,” Sibanye said.

Market reaction

The shares rose as much as 7.4% in Johannesburg to the highest since October. Sibanye can probably meet its target net debt to Ebitda ratio of 1.5 by the end of 2019, James Bell, an analyst at RBC Capital Markets, said in a note. Volatility at the gold operations will probably continue weighing on the company’s shares, although the strong performance in PGMs and quality of its US assets is “undeniable,” Bell said. So far, “positives outweigh the negatives.”

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