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Sibanye Gold has delivered higher gold production and operating profit for the six months ended 30 June 2013, proving that the countries oldest gold mines still hold value.

CEO Sibanye Gold’s Neal Froneman, said the results for the period under review are pleasing. “The results support my belief that these assets, despite having been in operation for many decades, are still some of the best gold mines in the world and, will continue to be so for many years to come.”

The implementation of Sibanye Gold’s new operating strategy is proceeding well and is starting to reflect in improved production and lower costs. Gold production for the six months ended 30 June 2013 was 23% higher at 20 413kg (656 300oz), than in the six months ended 31 December 2012, with total cash cost of R289 031/kg (US$983/oz) and Notional cash expenditure (NCE) of R359 114/kg (US$1 221/oz), 12% and 16% lower respectively.

Despite a sharp fall in the gold price since mid-April 2013, Sibanye Gold generated an operating profit of R3.3 billion (US$363 million) for the six months ended 30 June 2013, which is 63% higher than in the previous six months ended 31 December 2012. Net cash generated for the period was R1.8 billion (US$197 million).

The six months ended 31 December 2012 was materially impacted by the fire at Driefontein‘s Ya Rona shaft and the illegal industrial action during September and October 2012, which distorts the comparison. It is more prudent and realistic to compare the six months ended 30 June 2013, with the comparable period in 2012.

Gold production and NCE costs for the six months ended 30 June 2013 were five per cent lower and 13% higher respectively, than the comparable period in 2012. The first quarter of 2013 contained a number of material operational disruptions (the fire at Beatrix West Section and the Driefontein power outage) so that the six month, year-on-year comparison does not reflect what was a significantly better second quarter in 2013. It is pleasing to note that operational trends improved into the second quarter of 2013 and we are beginning to arrest the historical declining production and increasing cost profile. Management remains committed to continuing the process of reversing the declining production and increasing costs trends that have historically plagued these assets.

Production of 11 101kg (356 900oz) in the second quarter of 2013 was 19% higher than in the first quarter and comfortably beat our forecast of 10 600kg (340 000oz). Costs similarly were significantly better, with NCE declining by 11% to R340 465/kg (US$1 125/oz), against a forecast of R360 000/kg (US$1 220/oz). These improving trends have continued into July and further operational improvements are expected.

A detailed review of every aspect of the business continues, with specific focus on increasing output, reducing costs and improving productivity.

Organisational effectiveness has been improved by:

–  Separating the Kloof/Driefontein complex (KDC) into the Kloof and Driefontein Operations in order to    improve the operational focus and reduce the span of control;

–  Creating a focused minerals processing business unit to ensure that the metallurgical throughput is maximised and that the large surface gold resources are brought to account;

–  Simplifying management structures and removing unnecessary layers; reducing costs and improving communication and response time, as well as positioning the collective experience of senior management closer to the work face;

–  Appointing multi-disciplinary and empowered mining and metallurgical management teams; and

–  Consolidating all supporting and service functions to ensure cost effective and efficient support for the operating units.

Longer term, there remains significant potential for further improvements, by way of:

–  A detailed analysis of access and travel times in order to increase time at the face;

–  Alternate shift cycles, stoping crew optimisation and a bonus review to improve effectiveness;

–  Assessing the potential to safely mine high-grade remnant and support pillars, which have been excluded from the reserves since 2008; and

–  Assessing the potential of secondary reefs.

With the good and visible progress that has been made on restoring operational credibility, it is now appropriate to focus on securing the future of our fourth mine, the West Rand Tailings Project, and extending the life of Beatrix through the very significant gold and uranium resources contained within the current mining lease area.

On 8 July 2013, Sibanya Gold restructured its debt, giving it greater flexibility and removing the constraint on paying an interim dividend. Also, as a result of the restructuring, the final dividend covenant was amended so that the company may consider increasing the final total dividend from 25% to 35% of normalised earnings.

This is a strong vote of confidence by the lenders in Sibanye Gold’s cash generative ability.

The improving operational performance and the debt restructuring has ensured that the company is well placed to declare a maiden dividend, once there is sufficient financial and operational stability. Management remains committed to being a benchmark dividend payer.

Wage negotiations between the South African Gold Mining Industry and Organised Labour began in July 2013. The unions have tabled varying demands, which appear to bear no reference to the cost and revenue pressures facing the industry. The Gold mining Industry, through the Chamber of Mines, has tabled an offer which takes cognisance of these pressures. It is difficult to forecast what the outcome of the negotiations might be but Sibanye Gold remains firm in its view and is well positioned.

We are well prepared for extended strikes and have made plans to limit losses should production disruptions occur. We are aware of the critical need to control costs in order to stabilise production and extend the lives of the operations and will not be coerced into unsustainable outcomes.

The benefits from the business review and restructuring are expected to result in greater operational effectiveness and lower costs in the six months ending 31 December 2013. While the likelihood of costly operational disruptions remains high given the uncertainty around the wage negotiation period, under normal circumstances, group production is forecast to increase by 8% to approximately 22 000kg (700 000oz), and NCE is forecast to be approximately R360 000/kg. All-in cost for the six months ending 31 December 2013 is forecast at R375 000/kg

mainly due to an increase in capital expenditure.

For the year ending December 2013, gold production is estimated at 42 000kg (1.35 million oz). Total cash cost is estimated at R290 000/kg and NCE at R360 000/kg which is around a five per cent improvement compared with the guidance provided in the Trading statement published on 8 May 2013. The All-in cost for the year is estimated at R375 000/kg.

‘I remain bullish on the future and sustainability of Sibanye Gold. There is no doubt that the company is made up of world-class assets both in terms of the people and the ore-body,” concluded Froneman.

Salient features for the six months to 30 June 2013:

–  A 63% increase in operating profit to R3.3bn (US$363m) compared with the six months ended 31 December 2012.

–  A seven fold increase in available cash to R2.1bn (US$206m) from 31 December 2012, reducing net debt to R1.9 billion (US$188m).

–  A 23% increase in gold produced to 20 413kg (656,300oz) compared with the six months ended 31 December 2012.

–  Total cash cost of R289 031/kg (US$983/oz) is 12% lower compared with the six months ended 31 December 2012, with NCE of R359 114/kg (US$1 221/oz), 16% lower.

–  Positive safety trends from 2012 continue.

–  Bridge loan facility restructured on 8 July 2013 to provide greater flexibility

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