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Sibanye strategic and operating update
Sibanye Gold Limited
Incorporated in the Republic of South Africa
Registration number 2002/031431/06
Share code: SGL
ISIN – ZAE000173951
Issuer code: SGL
(“Sibanye” or “the Group”)
SIBANYE STRATEGIC AND OPERATING UPDATE
Westonaria, 4 June 2014: Sibanye (JSE: SGL & NYSE: SBGL) is
hosting a strategic, technical and operational update for
investors, analysts and media at its Libanon corporate offices on
4 June and operational visits on 5 June 2014. The Group will be
releasing new, material, information as set out in this SENS with
the detailed information available on Sibanye’s website
www.sibanyegold.co.za, from 08h30 (CAT) today.
Stakeholders are therefore advised to take careful note of the
contents of this release and are recommended to access the live
webcast of the presentations at www.sibanyegold.co.za from 08h30
(CAT) on 4 June 2014. Recordings of the webcast will also be
available on the Company’s website after 4 June 2014.
1. Significantly increasing Mineral Reserves and Resources
Following the conclusion of the of Witwatersrand Consolidated
Gold Resources Limited (“Wits Gold”) and the Cooke underground
and surface operations (“Cooke”) acquisitions, Sibanye has
revised its C2014 Mineral Resources and Mineral Reserves
statement; incorporating Mineral Resources and Mineral Reserves
previously held by Wits Gold in the Southern Free State
(excluding Potchefstroom Mineral Resources from the Klerksdorp
and Potchefstroom prospecting rights) and those attributable to
Cooke.
- Total Group gold Mineral Reserves increased by 66% from
19.7Moz at 31 December 2013 to 32.7Moz and gold Mineral
Resources increased by 98% to 128.7Moz.
- Total underground gold Mineral Reserves have increased by
67% from 15.2Moz declared at 31 December 2013 to 25.6Moz.
- Surface gold Mineral Reserves increased by 58% to 7.1Moz
primarily due to the addition of Cooke’s Tailings Surface
Facilities (“TSF”) to the West Rand Tailings Retreatment
Project (“WRTRP”).
- Uranium Mineral Reserves have more than doubled to 102.8Mlbs
and uranium Mineral Resources increasing by 239.1Mlbs since
the 31 December 2013 declaration with the addition of
Cooke’s Tailings Surface Facilities (“TSF”) to the West Rand
Tailings Project (“WRTRP”) and Wits Gold’s Beisa North and
South uranium Mineral Resources
Revised Sibanye Operations and Projects gold Mineral Resource and
Mineral Reserve summary (including recent acquisitions)
Mineral Resources Mineral Reserves
Gold 31 Dec 31 Dec
31 Dec 2013 2012 31 Dec 2013 2012
Sibanye Gold Tons Grade Gold Gold Tons Grade Gold Gold
Operations & Projects (Mt) (g/t) (Moz) (Moz) (Mt) (g/t) (Moz) (Moz)
Underground
Beatrix 58.6 4.9 9.18 8.29 30.7 3.6 3.54 3.32
Driefontein 60.1 10.9 21.10 22.10 25.7 7.2 5.91 4.23
Kloof 65.2 14.4 30.13 39.49 22.2 8.1 5.78 5.46
Cooke 142.6 4.1 18.99 19.82 12.9 4.4 1.84 1.84
Wits Gold Projects 243.6 5.4 42.05 26.45 55.1 4.8 8.50 5.40
Total underground 570.1 6.6 121.44 116.15 146.5 5.4 25.57 20.25
Current surface rock
dumps (SRD) and
tailings storage
facilities (TSF)
Beatrix 10.5 0.4 0.13 0.15 7.5 0.4 0.09 0.04
Driefontein 15.8 0.5 0.25 0.34 6.4 0.7 0.15 0.14
Kloof 6.4 0.7 0.15 0.14 15.8 0.5 0.25 0.34
Cooke (Randfontein
24.8 0.4 0.28 0.27 19.7 0.4 0.23 0.21
Surface)
Total SRD and TSF 57.5 0.4 0.81 0.90 49.4 0.4 0.71 0.73
Project TSF (WRTRP)
Driefontein 161.9 0.3 1.79 1.52 161.9 0.3 1.79 0.00
Kloof 252.3 0.3 2.24 2.22 252.3 0.3 2.24 0.00
Cooke 288.1 0.3 2.45 2.45 280.4 0.3 2.40 0.77
Total WRTRP 702.3 0.3 6.48 6.19 694.6 0.3 6.42 0.77
Group Total 1329.9 3.2 128.73 123.24 890.5 1.2 32.70 21.75
Rounding-off of figures may result in minor computational discrepancies, where this happens it
is not deemed significant
Revised Sibanye uranium Mineral Resource and Mineral Reserve
summary (including recent acquisitions)
Mineral Resources Mineral Reserves
Uranium 31 Dec 31 Dec
31 Dec 2013 2012 31 Dec 2013 2012
Sibanye Gold Tons Grade U308 U308 Tons Grade U308 U308
Operations & Projects (Mt) (kg/t) (Mlb) (Mlb) (Mt) (kg/t) (Mlb) (Mlb)
Underground
Beatrix 12.5 0.931 25.66 - - - - -
Driefontein - - - - - - - -
Kloof - - - - - - - -
Cooke 48.2 0.479 50.86 53.25 5.6 0.436 5.42 4.22
Wits Gold Projects 216.5 0.226 107.84 107.84 - - - -
Total underground 277.2 0.302 184.36 161.09 5.6 0.436 5.42 4.22
Project tailings
storage facilities
(WRTRP)
Driefontein 153.7 0.064 21.76 - 153.7 0.064 21.76 -
Kloof 252.3 0.038 21.39 - 252.3 0.038 21.39 -
Cooke 288.1 0.086 54.78 54.78 280.4 0.088 54.26 34.33
Total WRTRP 694.1 0.064 97.93 54.78 686.4 0.064 97.41 34.33
Group Total 971.4 0.132 282.29 215.87 692.1 0.067 102.83 38.55
Rounding-off of figures may result in minor computational discrepancies, where this happens it
is not deemed significant
The Competent Person designated in terms of SAMREC, who takes
responsibility for the reporting of Sibanye Gold’s Mineral
Resources and Mineral Reserves is the current Head of Mine
Planning and Mineral Resource Management for Sibanye Gold,
Gerhard Janse van Vuuren [BTech (MRM); GDE (Mining Eng.); MBA;
MSCoC (PLATO – No. 0243)). Mr. Janse van Vuuren has 26 years
experience in the mining industry. Additional information
pertaining to the teams involved in compiling the Mineral
Resource and Mineral Reserve declaration is incorporated in
the Mineral Resources and Mineral Reserves Supplement. The
Competent Person consents to the inclusion of the above
information in the form and context in which it appears.
Stakeholders are advised further detail relating to the C2014
Reserves and Resources statement will be made available on
Sibanye’s website www.sibanye gold.co.za, from 08h30 (CAT)
today.
2. Increasing sustainable production levels and extending life of
Mine (“LoM”)
In C2013 Sibanye implemented a new operating model and
organisational structures and significantly restructured the
business, in order to arrest the declining production and
increasing cost trends that had prevailed at its Kloof,
Driefontein and Beatrix operations (“KDB”) during the previous
decade.
Successful implementation of these initiatives resulted in
production increasing by 17% to 44,474kg (1.43Moz) and All-in
cost declining by 8% to R354,376/kg (US$1,148/oz) in C2013
compared with C2012. These operational improvements
facilitated Sibanye declaring a 46% increase in its declared
Mineral Reserves at 31 December 2013.
The revised C2013 Sibanye LoM plan, underpinned by the
increased Mineral Reserves, have resulted in increased
production forecasts for the KDB operations to approximately
1.4Moz per annum until 2018, with forecast production levels
remaining above 1.2Moz until 2020 (previously declining below
1.2Moz in 2016). The forecast Group LoM for KDB was also
extended by 3 years.
Stakeholders are advised that further detail relating to the
previously undisclosed C2013 LoM plan will be made available
on Sibanye’s website www.sibanye gold.co.za, from 08h30 (CAT)
today .
3. Logical consolidation – adding long term value
Sibanye has pursued logical regional consolidation through the
Cooke and Wits Gold acquisitions. The acquisitions will
enhance and extend Sibanye’s operating life and enable the
Group to leverage existing infrastructure and regional
synergies to extract value for stakeholders.
The incorporation of Cooke and Wits Gold have resulted in a
significant increase in C2014 Reserves and production and
extended the C2014 LoM production profile. Sibanye is
confident that these acquisitions will support a sustained
dividend yield for longer and benefit all of its stakeholders.
The addition of the forecast Cooke LoM production has
increased Group forecast production for C2014 by 12% to
1.58Moz and Sibanye has increased its sustainable production
target from 1.2Moz pa to 1.4Moz pa, which, on the basis of the
revised C2014 Sibanye LoM plan, will be maintained for
approximately 5 years to 2020. Capital required to maintain
the revised C2014 LoM profile is approximately R360m higher in
2014 at approximately R3.5bn and R400m higher in 2015 than in
the previous C2013 Sibanye LOM plan, due to Ore Reserve
Development (“ORD”) capital required at Cooke to increase ore
reserve flexibility and facilitate the production build-up
from the uranium by-product areas.
Stakeholders are advised that further detail relating to the
Sibanye C2014 LoM plan including detail on Cooke, will be made
available on Sibanye’s website www.sibanye gold.co.za, from
08h30 (CAT) on today.
4. Sustaining the dividend yield
Sibanye is differentiated by its South African focus, holistic
approach to stakeholder relations and its strategic market
position as a benchmark dividend vehicle in the mining sector.
The ability to deliver on the dividend underpins and informs
the corporate strategy and decision making.
In the longer term the ability to sustain the dividend will
need to be supported by organic and acquisitive growth.
Strategic decisions relating to growth will be directed by the
ability of the Group to sustain or enhance its dividend
strategy and, as a result, growth will be funded from cash
flow after dividends or alternative funding options may be
considered where appropriate
Sibanye’s dividend policy will remain unchanged at 25-35% of
normalised earnings.
5. Growth
A dedicated new business team has recently been appointed to
assess all growth opportunities which support Sibanye’s long
term dividend yield strategy.
Sibanye will pursue both organic and acquisitive growth, as
long as:
- it is consistent with and supports its dividend strategy,
- is earnings and/or cashflow enhancing, and
- strategically positions the Group for further realisation of
value.
Strict filters will be applied to organic growth projects
including assessing each project for risk, returns and the
impact of financing on returns.
Acquisitive growth must be earnings accretive or strategic,
with medium term potential to support the core dividend
strategy. Sibanye will pursue value and growth in other mining
sectors if supportive of its core dividend strategy.
6. Projects and Organic growth
A full evaluation of Sibanye’s organic growth opportunities
has commenced. Sibanye has an extensive project pipeline from
early stage scoping studies to feasibility studies, both on
new projects and existing operations. Project evaluation
criteria have been developed to guide the evaluation,
prioritisation and progress of our internal projects.
The majority of these projects are at a sufficiently advanced
level to develop discounted cash flow models, facilitating the
opportunity to determine the potential impact of our organic
growth opportunities on our existing LOM plans.
The company will be presenting comprehensive detail on its
project portfolio, which illustrates that it has the potential
to extend its LoM operating profile at over 1.4Moz per annum
on a sustainable basis, for a period exceeding 10 years, if
all projects are developed.
On the basis of the current project studies, annual capital
requirements do not exceed R4.5bn per annum, and remain
relatively constant on a unit cost basis at approximately
US$250/oz (in C2014 money terms). The net result is a
potential sustained cash flow profile well beyond 10 years,
that despite the additional capital required in the short
term, would not detrimentally impact on our ability to
maintain our dividend pay-out.
While it is clearly recognised that it is likely that some
projects may not meet the required evaluation criteria, and
hence may not be implemented, initial assessment demonstrates
sufficient organic growth flexibility to have confidence in
our ability to maintain our targeted production and economic
output levels for more than 10 years.
Stakeholders are advised that further detail relating to
Sibanye’s organic growth projects, including a conceptual LoM
profile, will be made available on Sibanye’s website
www.sibanye gold.co.za, from 08h30 (CAT) today.
7. Uranium strategy
On 29 May 2014 Sibanye announced that it had produced and
delivered its first 10 tons of ammonium diuranate (“ADU”) to
the Nuclear Fuels Corporation of South Africa (Proprietary)
Limited (“NUFCOR”).
Production of by-product uranium is a critical component of
the operational turnaround at Cooke and will enable the Group
to extract value from otherwise uneconomic gold Mineral
Resources. Revenue from the sale of uranium by-product, which
is associated and mined with the gold, will be offset against
the gold production costs, thereby enabling the optimisation
of the medium-grade gold Mineral Resources. Uranium production
from Cooke is forecast at approximately 500,000lb per annum by
2016.
Extraction of uranium from Sibanye’s surface tailings is also
an environmental imperative and will enable the realisation of
up to 7Moz of gold contained in the WRTRP resources. Up to
350,000lb of uranium per annum could be realised from the
initial phases of this project
The development of Sibanye’s existing uranium business is a
logical strategy. Increasing production to meaningful and
consistent levels will enable offtake contracts at higher
prices to be secured, and ensure the relevance of the uranium
strategy.
Sibanye will also consider partnerships or acquisitions which
support its ability to secure higher contract prices
Stakeholders are advised that further detail relating to
Sibanye’s uranium strategy will be made available on Sibanye’s
website www.sibanye gold.co.za, from 08h30 (CAT) today.
8. Platinum rationale
Growth in the platinum sector is consistent with Sibanye’s
strategy to grow the business in order to sustain its dividend
profile and with its South Africa focus.
The platinum industry shares many similarities to the gold
industry and provides an opportunity to leverage Sibanye’s
operating model and proven deep level mining capability.
Opportunities will be carefully assessed and will have to meet
all internal investment criteria
9. Surface Operation and West Rand Tailings Retreatment Project
Sibanye’s surface operations have been restructured into a
separate standalone business unit in order to bring the
appropriate focus, and position the Surface Operation for the
development of its sizable gold and uranium Resources
contained in its West Rand Tailings Surface Facilities
(“TSF”), which form part of the West Rand Tailings Retreatment
Project (“WRTRP”).
Sibanye’s Surface strategy involves developing a strong, long
life and high yield surface business in support of the group’s
sustainable long term dividend policy. Key to the successful
execution of the development strategy is the WRTRP, which
contains 7.1Moz of gold and 97.4Mlbs of uranium. A
prefeasibility study concluded in 2013 confirmed the economic
viability of the WRTRP, which involves the construction of a
large-scale Central Processing Plant for the economic
extraction of gold and uranium from the retreatment of
historical and current tailings. A further objective of the
project remains the re-deposition of the residues in
accordance with modern sustainable deposition practices,
reducing future environmental liabilities.
Sibanye’s Board has approved a Definitive Feasibility Study
(“DFS”) which will further advance concepts developed during
the pre-feasibility study.
The DFS will focus on leveraging existing surface
infrastructure including the Driefontein 2/3 and Kloof 1
surface gold plants as well as the available uranium treatment
capacity at the Ezulwini gold and uranium processing plant to
sustain surface gold production prior to development (subject
to approval) of a new large scale Central Processing Plant.
Sibanye’s revised strategy is to develop the WRTRP in phases,
allowing for the staging of capital.
The DFS will be executed over a 12-15 month period and will
target capex and opex accuracy estimates of ±10%.
Stakeholders are advised that more detail relating to
Sibanye’s Surface Operation will be made available on
Sibanye’s website www.sibanye gold.co.za, from 08h30 (CAT)
today.
10. The Burnstone Project
Sibanye exercised an option held by Wits Gold to acquire
Southgold Exploration Proprietary Limited (“Southgold”), which
owns the Burnstone operations (“Burnstone”) for a nominal
amount, subject to satisfaction of outstanding conditions
precedent.
Burnstone presents an attractive opportunity for Sibanye, from
both a strategic and operational perspective.
? purchase of existing infrastructure, underground access and
metallurgical plant for $7.25m
? favourable debt funding terms
? The Sibanye mine plan has de-risked the Burnstone
opportunity by:
o detailed understanding and review of the orebody
o application of appropriate and well understood mining
methods
o opportunity to commence immediately with footwall
development from multiple attack points
o an achievable ramp up profile benchmarked against similar
operations
o further enhancement to the project economics without the
requirement for material re-work through orebody modelling and
associated mine plan optimisation
Stakeholders are advised that more detailed information
relating to Burnstone will be made available on Sibanye’s
website www.sibanye gold.co.za, from 08h30 (CAT) today.
ENDS
4 June 2014
Contact
James Wellsted
Head of Investor Relations
Sibanye Gold Limited
+27 83 453 4014
james.wellsted@sibanyegold.co.za
Sponsor
Sponsor: J.P. Morgan Equities South Africa (Pty) Ltd
FORWARD LOOKING STATEMENTS
Certain statements in this document constitute ‘forward looking
statements’ within the meaning of Section 27A of the US Securities
Act of 1933 and Section 21E of the US Securities Exchange Act of
1934.
Such forward looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance or achievements of the Group to be
materially different from the future results, performance or
achievements expressed or implied by such forward looking
statements. Such risks, uncertainties and other important factors
include among others: economic, business and political conditions in
South Africa and elsewhere; the ability to achieve anticipated
efficiencies and other cost savings in connection with past and
future acquisitions, exploration and development activities;
decreases in the market price of gold and/or uranium; hazards
associated with underground and surface gold and uranium mining;
labour shortages and disruptions; availability, terms and deployment
of capital or credit; changes in government regulations,
particularly environmental regulations and new legislation affecting
mining and mineral rights; the outcome and consequence of any
potential or pending litigation or regulatory proceedings or other
environmental, health and safety issues; power disruptions and cost
increases; changes in exchange rates, currency devaluations,
inflation and other macro-economic factors; industrial action;
temporary stoppages of mines for safety and unplanned maintenance
reasons; and the impact of the HIV/AIDS crisis in South Africa.
These forward looking statements speak only as of the date of this
document.
The Group undertakes no obligation to update publicly or release any
revisions to these forward looking statements to reflect events or
Date: 04/06/2014 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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