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SIBANYE GOLD LIMITED - Clarification of Sibanye Gold working and capital costs in pre-listing statement and CPR

Release Date: 22/04/2013 09:49
Code(s): SGL     PDF:  
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Clarification of Sibanye Gold working and capital costs in pre-listing statement and CPR

Sibanye Gold Limited
Incorporated in the Republic of South Africa
Registration number 2002/031431/06
Share code: SGL
ISIN – ZAE000173951
Issuer code: SGL
(“Sibanye Gold”)

CLARIFICATION OF SIBANYE GOLD WORKING AND CAPITAL COSTS IN PRE-
LISTING STATEMENT AND CPR

Westonaria, 22 April 2013: It has come to management’s attention
that some of the information released in the Pre-Listing
Statement (PLS) and accompanying Competent Persons Reports (CPR),
during the unbundling of Sibanye Gold may have been incorrectly
interpreted by analysts and the market leading to an
undervaluation of Sibanye Gold.

This release serves to clarify the difference in the way Sibanye
Gold reports working costs and capital expenditure for Financial
Reporting purposes and the reporting convention used in the PLS
and CPRs.

Background
Prior to 2006, The South African gold mining industry convention
was to treat ore reserve development (ORD) costs as part of
working costs, which were then expensed through the income
statement in the period they were incurred. But from 2006, Gold
Fields Ltd (Gold Fields) and the majority of the South African
gold industry elected to capitalise ORD costs. As such and in
line with international accounting convention ORD costs were then
amortised though the income statement over the life of mine.
Sibanye Gold continues to report its financial results using this
convention.

The net result of this change in accounting convention was that
working costs were reduced by the quantum of ORD costs, while
capital expenditure was increased by the same amount. NCE costs
(which are the sum of working costs and capital expenditure) and
free cash flow are however not affected.

Clarification
Before the listing and unbundling of Sibanye Gold on 11 February
2013, Gold Fields released the Sibanye Gold PLS to all of its
shareholders and the market in general. At the same time detailed
CPRs for Sibanye Gold’s operations were made available on its
website.

The financial information in these CPRs was presented according
to the accounting convention used prior to 2006 and ORD costs are
included in working costs, not capitalised.
This discrepancy has led to some sell side analysts believing
that the capital expenditure contained in the CPR is understated
and increasing capital expenditure as well as applying the higher
working costs from the CPR in their financial models and thereby
overstating the NCE costs for the company.

 Fig 1. Sibanye Gold Financial Planning Parameters*   ()
                            F2013          F2013
                 C2012      (planned       (planned         %
                 (actual) (Financial       (CPR))           diff
                            Reports))
 Gold produced
 (kg)               38 059          44 163       44   163      -
 Working costs
 (Rm)               10 874          12 207       14   056    +15
 Working costs
 (R/kg)            285 851         276 417      318   280    +15
 Capital (Rm)        3 107           3 093        1   244    -60
 Capital (R/kg)     81 634          70 034       28   169    -60
 NCE (R/kg)        367 485         346 451      346   449      -
 Gold Price
 (R/kg)            434 961         400 000      400   000      -
 NCE Margin (%)        16%             13%            13%      -
 Free cash (Rm)      2 596           2 365        2   365      -
* as at 31 December 2012

Fig 1. above outlines the differences. The C2012 numbers are
included for comparison purposes. From Fig 1 it is also clear
that there is no impact on NCE costs (which are the sum of
working costs and capex) or on operating free cash flow.

It should also be noted that Sibanye Gold’s ore reserves were
calculated assuming a gold price of R380 000/kg (based on an
average three year trailing gold price plus 5%, in accordance
with SEC guidelines) and will therefore be unaffected by the
current spot gold price.

ENDS


Contact

James Wellsted
Head of Corporate Affairs
Sibanye Gold Limited
+27 83 453 4014
james.wellsted@sibanyegold.co.za

Sponsor
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd

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