Sibanye Gold Output Returns to Normal as Strike Fallout Ebbs

(Bloomberg) -- Sibanye Gold Ltd. expects gold production at operations that were hit by a five-month wage strike to normalize this month, indicating a brighter outlook for the company.

• South Africa’s top gold producer is ramping up output and sees production of as many as 546,000 ounces in the second half, significantly higher than 263,000 ounces produced in the first six months, the company said Thursday. Output slumped in the first quarter after thousands of workers went on strike.

Key Insights

• Sibanye for years has relied on bullion as its most important source of revenue, but has increasingly focused on platinum-group metals.
• Output at its palladium-rich U.S. operations rebounded 18% to 153,874 ounces after a slower-than-anticipated start in the first quarter, though a “significant” improvement is anticipated in the second half.
• Platinum metals output at its South Africa mines may be at top end of the 1.1 million ounces previously guided. Production rose 8% to 283,526 ounces in period to June.
• Sibanye, which became the world’s top platinum producer after its acquisition of Lonmin Plc, said its half-year results due Aug. 29 will include figures from Lonmin operations starting from June.

Market Reaction

• Sibanye shares fell 1.5% in Johannesburg. The stock has doubled this year.

Outlook

• Despite higher prices for precious metals and more cash on the balance sheet, Sibanye still faces risks from operational challenges at gold mines and the integration of Lonmin assets, RBC Capital Markets analysts including James Bell, said in a note.
• “Risks around the group remain elevated,” the analysts said. “South African headwinds also appear to be somewhat elevated given issues with power load shedding by state provider Eskom.”

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To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin

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