SIBANYE GOLD LIMITED - Sibanye operating and strategic update for the six-months ended 31 December 2016

Sibanye operating and strategic update for the six-months ended 31 December 2016

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”, “Sibanye” or “the Group”)

SIBANYE OPERATING AND STRATEGIC UPDATE FOR THE SIX-MONTHS ENDED 31 DECEMBER
2016


-   Gold production in line with H1 2016
-   Average underground gold grade increased by 4% year-on-year
-   Kroondal, Mimosa and Platinum Mile beat guidance on PGM production and
    costs
-   Operational turnaround at the Rustenburg operations
-   Good progress has been made regarding the proposed acquisition of
    Stillwater Mining Company Limited (“Stillwater”)
-   Successful syndication of Stillwater bridge financing – oversubscribed by
    more than US$1 billion


OPERATING UPDATE

Gold Division

Sibanye’s Gold Division produced approximately 23,800kg (765,000oz) of gold
for the six months ended 31 December 2016. This is similar to the amount
produced during the six months ended 30 June 2016, but is 7% lower than the
comparable period in 2015. The year-on-year decline in production is primarily
due to the closure of the Cooke 4 shaft during the period and a number of
power outages due to severe thunderstorm activity that occurred during the
last quarter. Gold production for the full year of approximately 47,000kg
(1.5Moz) 2016 was approximately 2% lower than guidance.

Targeted mineral reserve management and limited mining below cut-off grades,
resulted in the average underground grade increasing by 4% year-on-year to
5.31g/t. An increased focus on fragmentation and cleaning practices, resulted
in the average Mine Call Factor increasing by 2% to 81%.

The Gold Division maintained its development rates during 2016, and as a
result, has ended the year with an increase in developed ore reserve to 20
months, compared with 19 months in 2015.

All-in Sustaining Costs (“AISC”) for the six months ended 31 December 2016
will be approximately R452,000/kg (US$1,007/oz), lower than forecast AISC of
R460,000/kg as a result of good cost controls. All-in Costs (“AIC”) will be
approximately R475,000/kg (US$1,005/oz).

The gold price received of approximately R569,000/kg (US$1,268/oz)for the six
months ended 31 December 2016 was 6% lower than for the six months ended 30
June 2016, primarily due to a 9% stronger average exchange rate of R13.97/US$,
which offset a 4% increase in the average dollar gold price.
Platinum Division

The Platinum Division delivered a solid operating result, with attributable
platinum group metal (“PGM”) production amounting to approximately 230,000oz
(4E) for the December 2016 quarter, which now includes two months from the
Rustenburg operations. For the six months ended 31 December 2016, attributable
production from Kroondal and Mimosa was approximately 118,000oz (4E)
and62,000oz (4E) respectively.

It is particularly pleasing to note the operational turnaround achieved at
the Rustenburg operations during the fourth quarter, following a challenging
first 9 months of 2016. The Rustenburg Operations produced approximately
210,000oz (4E) for the full December 2016 quarter, an improvement of 7% from
the previous quarter and 9% more than for the comparable quarter in 2015.
Attributable production from the Rustenburg Operations for November 2016 and
December 2016, was approximately 138,000oz (4E), which is in line with our
expectations.

Attributable PGM production of approximately 95,000oz (4E) from Kroondal,
Mimosa and Platinum Mile, again beat guidance of 88,000oz (4E) for the
December 2016 quarter. The solid operational performance at Kroondal enabled
sufficient stockpiles to be built to allow milling to continue uninterrupted
throughout the annual 11 day Christmas break, for the first time in four
years.

Cash operating costs for the Platinum Division, excluding the Rustenburg
Operations, were approximately R9,200/4Eoz (US$675/4Eoz) for the December
2016 quarter, below the forecast of R9,700/4Eoz (US$690/4Eoz). Costs at
Kroondal and Mimosa substantially beat the original guidance provided, due to
operational outperformance and good cost control. Cash operating costs,
including the Rustenburg      Operations, are    approximately   R10,600/4Eoz
(US$770/4Eoz) with the Rustenburg Operations averaging approximately
R11,500/4Eoz (US$835/4Eoz) for November 2016 and December 2016. These unit
costs are consistent with our expectations and highlight the necessity and
importance of realising the operating and cost synergies identified during
the Rustenburg due diligence to ensure sustainability of the Rustenburg
Operations.

A further operational benefit at Rustenburg has been the sustained increase
in chrome production following the successful commissioning of the inter-
stage plant in February 2016, with enhanced steady-state yields achieved from
September 2016. Chrome production for the two months was approximately
75,000t. The improved production volumes, combined with the recent increase
in chrome prices, has significantly added to the margins achieved at the
Rustenburg operations.

Following the ongoing integration of the Aquarius operations, the integration
of the Rustenburg operations is underway and implementation is according to
schedule. The Group has previously highlighted that it expects to realise
operational synergies of approximately R800 million per annum from the
combined Aquarius and Rustenburg operations. While this is anticipated to be
achieved over a three year period, the first steps in realising these
synergies have begun. A Section 189 process at the Platinum Division was
announced on 26 January 2017. Short term mine plans are currently being
reviewed and optimised, with specific consideration of the operational
efficiencies that can be obtained through the “dropping of mine boundaries”
between the Kroondal and Rustenburg mines and shared overhead infrastructure.
Capital Expenditure

Capital expenditure for the period under review was approximately R2.4
billion, while total capital spent for 2016 was approximately R4.2 billion.
This was inclusive of growth capital expenditure for the year of approximately
R750 million.

The consensus outlook for precious metal prices in the near term, particularly
in rand terms, is subdued, with the rand remaining surprisingly resilient.
Further, sustained strength of the rand will impact on South African mining
industry operating margins, including those of Sibanye’s South African Gold
and Platinum Divisions. In light of these factors and the likely impact on
cash flow, management is re-evaluating its current growth capital expenditure
plans. This includes reviewing the planned 2017 capital profile at the UG2
project at Rustenburg, the Burnstone project and the West Rand Tailings
Retreatment Project (“WRTRP”). Certain projects may be deferred or placed on
care and maintenance until commodity prices sustainably improve, and/or
exchange rate volatility has subsided.

STRATEGIC UPDATE – STILLWATER TRANSACTION

Good progress has been made regarding the proposed acquisition of Stillwater,
which was announced on 9 December 2016 (the “Transaction”). The acquisition
of this Tier 1, low cost PGM producer is expected to enhance Sibanye’s asset
base and create a globally competitive South African mining champion.

In addition to expanding Sibanye’s portfolio with high-grade reserves that
currently support over 25 years of mine life, Stillwater also offers near-
term, low-cost organic growth through the Blitz Project, medium term growth
through the Lower East Boulder project and longer term opportunities through
the substantial unmined strike extensions of the current operations.

The world class downstream processing facilities will provide Sibanye with a
mine-to-market PGM business and a steady state recycling operation that has
consistent margins and strategic insight into the PGM markets. Ultimately,
this Transaction will attractively position Sibanye’s Platinum Division on
the global cost curve, enhancing our ability to sustain and pay industry-
leading dividends.

Despite the sustained US Dollar strength during 2016, the palladium price has
continued its upward trajectory from approximately US$500/oz in January 2016
to over US$700/oz in January 2017. Stillwater’s PGM Reserves comprise
approximately 78% palladium.

Post the Transaction announcement, Sibanye management were well received in
Billings, Montana, where they met Stillwater management, employees, organised
labour representatives and local community groups.

An initial marketing roadshow to shareholders was also undertaken during
December 2016, and feedback to date has reflected general support for the
Transaction. Sibanye management have also noted feedback that shareholders
prefer to minimise the financial leverage associated with the Transaction
with certain shareholders expressing support for an increased equity issue.


Financing
The initial financing for the Transaction comprising US$2.65 billion of bridge
facilities (the “Facilities”), was initially provided by Citi and HSBC. The
syndication of the Facilities was launched in early January 2017 and was
oversubscribed by more than US$1 billion. The Facilities were structured
with three tranches including Facility A comprising a $750m bridge-to-equity
(which will be repaid following a planned rights offering), Facility B
comprising a $300m bridge-to-cash and Facility C comprising a $1,600m bridge-
to-debt capital markets. Syndication raised over US$3 billion of commitments
into the syndicated US$1.9 billion combined B and C Facilities, across a final
syndicate of 16 banks. The syndication attracted strong interest from banks
with existing relationships with Sibanye, as well as a number of new
international banks, which we believe reflects confidence in Sibanye’s
operational and financial strategy.

Pending approval by shareholders, refinancing of the bridge loan is expected
to begin soon after the general meeting to approve the Transaction (“General
Meeting”), which is anticipated to be held in April 2017. Longer term
financing is expected to comprise an equity portion, and debt in the form of
corporate bonds.

At the time of the initial Transaction announcement, Sibanye expressed its
intention to raise a between a minimum of US$750 million and US$1 billion
dollars in the equity capital markets. Taking into account the current strong
rand environment, spot precious metals prices, and in response to feedback
from certain shareholders regarding the impact of these on the ability of the
Company to achieve a more desirable financial leverage ratio, Sibanye is
considering increasing the size of the equity component of the Stillwater
financing package up to US$1.3 billion. While the amount is still to be
finalised and is subject to then prevailing market conditions, exchange rates,
commodity prices and further engagement with our shareholders, Sibanye
believes that increasing the equity component would be prudent in the current
strong rand environment, allowing the Company to maintain a strong balance
sheet.

Regulatory and other approvals

Applications for various regulatory approvals for the Transaction have been
submitted on schedule, with US anti-trust conditions already satisfied
(announced on 19 January 2017). Shareholders will be appraised of further
approvals as they are received.

The implementation of the Transaction is, among other requirements, both
subject to and conditional on Sibanye shareholder approval of the Transaction
(majority of votes cast) and for the issuance of Sibanye shares in the context
of a potential rights issue (75% of votes cast). These approvals will be
obtained in a shareholders’ general meeting convened in accordance with
Sibanye’s memorandum of incorporation and the JSE Listings Requirements. In
addition, Stillwater shareholder approval (majority of votes outstanding) of
the Transaction is to be obtained.

Updated presentation available

An updated Investor presentation is available on the website at
https://www.sibanyegold.co.za/investors/events/presentations/2017    which
management will be referring to in upcoming meetings and interviews.

3 February 2017
Libanon

CONTACT

James Wellsted
SVP Investor Relations
Sibanye Gold Limited
+27 83 453 4014
james.wellsted@sibanyegold.co.za

Sponsor: J.P. Morgan Equities South Africa Proprietary Limited


ADDITIONAL INFORMATION AND WHERE TO FIND IT

This announcement does not constitute the solicitation of any vote, proxy
or approval. In connection with the proposed Transaction, Sibanye intends
to post to its shareholders a JSE Limited (“JSE”) Category 1 circular
subject to the approval of the circular by the JSE and Stillwater has filed
with the Securities and Exchange Commission (the “SEC”) relevant materials,
including a proxy statement. The JSE Category 1 circular and other relevant
documents will be sent or otherwise disseminated to Sibanye’s shareholders
and will contain important information about the proposed Transaction and
related matters. SHAREHOLDERS OF SIBANYE ARE ADVISED TO READ THE JSE
CATEGORY 1 CIRUCLAR AND OTHER RELEVANT DOCUMENTS WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. The proxy statement and other relevant documents will
be sent or otherwise disseminated to Stillwater’s shareholders and will
contain important information about the proposed Transaction and related
matters. SHAREHOLDERS OF STILLWATER ARE ADVISED TO READ THE PROXY STATEMENT
THAT HAS BEEN FILED AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN
THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. When available, Sibanye shareholders may
obtain free copies of the JSE Category 1 circular by going to Sibanye’s
website at www.sibanye.co.za. The proxy statement and other relevant
documents may also be obtained, free of charge, on the SEC's website
(http://www.sec.gov). Stillwater shareholders may obtain free copies of the
proxy statement from Stillwater by going to Stillwater’s website at
www.stillwatermining.com.

PARTICIPANTS IN THE SOLICITATION

Sibanye, Stillwater and their respective directors and officers may be
deemed participants in the solicitation of proxies of Sibanye’s and
Stillwater’s respective shareholders in connection with the proposed
Transaction. Sibanye’s shareholders and other interested persons may
obtain, without charge, more detailed information regarding the directors
and officers of Sibanye in Sibanye’s Annual Report on Form 20-F, for the
fiscal year ended 31 December 2015, which was filed with the SEC on 21
March 2016. Stillwater’s shareholders and other interested persons may
obtain, without charge, more detailed information regarding the directors
and officers of Stillwater in Stillwater’s Annual Report on Form 10-K for
the fiscal year ended 31 December 2015, which was filed with the SEC on 22
February 2016. Additional information regarding the interests of
participants in the solicitation of proxies in connection with the proposed
Transaction is included in the proxy statement that Stillwater has filed
with the SEC.
NO OFFER OR SOLICITATION

This announcement is for informational purposes only and does not
constitute an offer to sell, or a solicitation of offers to purchase or
subscribe for, securities in the United States or any other jurisdiction.
Any securities referred to herein have not been, and will not be,
registered under the US Securities Act of 1933 and may not be offered,
exercised or sold in the United States absent registration or an applicable
exemption from registration requirements.

FORWARD-LOOKING STATEMENTS

This announcement includes “forward-looking statements” within the meaning
of the “safe harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified
by the use of words such as “target”, “will”, “would”, “expect”,
“anticipate”, “plans”, “potential”, “can”, “may” and other similar
expressions that predict or indicate future events or trends or that are
not statements of historical matters.

These forward-looking statements, including, among others, those relating
to Sibanye’s future business prospects, revenues and income, expected
timings of the transactions (including completion), potential transaction
benefits (including statements regarding growth, cost savings and benefits
from and access to international financing), PGM pricing expectations,
levels of output, supply and demand, information related to the Blitz
Project, estimations or expectations of enterprise value, EBTIDA and net
asset values, wherever they may occur in this announcement, are necessarily
estimates reflecting the best judgment of the senior management and
directors of Sibanye, and involve a number of known and unknown risks and
uncertainties that could cause actual results, performance or achievements
of the Group to differ materially from those suggested by the forward-
looking statements. As a consequence, these forward-looking statements
should be considered in light of various important factors, including those
set forth in this announcement. Important factors that could cause the
actual results to differ materially from estimates or projections contained
in the forward-looking statements include, without limitation: economic,
business, political and social conditions in South Africa, Zimbabwe and
elsewhere; changes in assumptions underlying Sibanye’s estimation of its
current Mineral Reserves and Resources; the ability to achieve anticipated
efficiencies and other cost savings in connection with past and future
acquisitions, as well as at existing operations; the ability of Sibanye to
successfully integrate acquired businesses and operations (whether in the
gold mining business or otherwise) into its existing businesses; Sibanye’s
or Stillwater’s ability to complete the proposed transaction; the inability
to complete the proposed transaction due to failure to obtain approval of
the shareholders of Sibanye or Stillwater or other conditions in the merger
agreement; Sibanye’s ability to achieve anticipated efficiencies and other
cost savings in connection with the transaction; the success of Sibanye’s
business strategy and any changes thereto, exploration and development
activities; the ability of Sibanye to comply with requirements that it
operate in a sustainable manner; changes in the market price of gold, PGMs
and/or uranium; the occurrence of hazards associated with underground and
surface gold, PGMs and uranium mining; the occurrence of labour disruptions
and industrial action; Sibanye’s future financial position, plans,
strategies, objectives, capital expenditures, projected costs and
anticipated cost savings and financing plans; the availability, terms and
deployment of capital or credit; changes in relevant government
regulations, particularly environmental, tax health and safety regulations
and new legislation affecting water, mining, mineral rights and business
ownership, including any interpretations thereof which may be subject to
dispute; the outcome and consequence of any potential or pending litigation
or regulatory proceedings or other environmental, health and safety issues;
power disruptions, constraints and cost increases; supply chain shortages
and increases in the price of production inputs; fluctuations in exchange
rates, currency devaluations, inflation and other macro-economic monetary
policies; the occurrence of temporary stoppages of mines for safety
incidents and unplanned maintenance; Sibanye’s ability to hire and retain
senior management or sufficient technically skilled employees, as well as
its ability to achieve sufficient representation of historically
disadvantaged South Africans’ in its management positions; failure of
Sibanye’s information technology and communications systems; the adequacy
of Sibanye’s insurance coverage; any social unrest, sickness or natural or
man-made disaster at informal settlements in the vicinity of some of
Sibanye’s operations; and the impact of HIV, tuberculosis and other
contagious diseases. Further details of potential risks and uncertainties
affecting Sibanye are described in Sibanye’s filings with the JSE and the
SEC, including in Sibanye’s Annual Report on Form 20-F, for the fiscal year
ended 31 December 2015 and the Integrated Annual Report 2015. These
forward-looking statements speak only as of the date of this announcement.

Neither Sibanye nor Stillwater undertake no obligation to update publicly
or release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this announcement or to reflect
the occurrence of unanticipated events.

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