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SIBANYE STILLWATER LIMITED - Results for the six months and year ended 31 December 2019

Release Date: 19/02/2020 08:00
Code(s): SSW     PDF:  
 
Wrap Text
Results for the six months and year ended 31 December 2019

Sibanye Gold Limited
Trading as Sibanye-Stillwater
Incorporated in the Republic of South Africa
Registration number 2002/031431/06
Share code: SSW
ISIN – ZAE000259701
Issuer code: SSW
(“Sibanye-Stillwater” or “the Group” or “the Company”)

Results for the six months and year ended 31 DECEMBER 2019 – Short form announcement

Johannesburg, 19 February 2020: Sibanye Gold Limited trading as Sibanye-Stillwater
(Sibanye-Stillwater or the Group) (JSE: SSW & NYSE: SBGL) is pleased to report operating
and financial results for the six months ended 31 December 2019, and reviewed condensed
consolidated provisional financial statements for the year ended 31 December 2019.

SALIENT FEATURES FOR THE SIX MONTHS AND YEAR ENDED 31 DECEMBER 2019
- Continued improvement in Group safe production including zero fatalities at SA gold
  operations (+10 million fatality free shifts)
- 44% increase in revenue to R73 billion (US$5.0 billion) and R432 million profit for
  2019 (loss of R2.5 billion (US$191 million for 2018)
- 79% increase in adjusted EBITDA to record R14,956 million (US$1,034 million)
- Business significantly de-risked – ND:adjusted EBITDA reduced to 1.25x (from 2.5x at
  end 2018), well below debt covenants
- Solid operational recovery in H2 2019 following strike and other operational disruptions
  in H1 2019
- Successful Integration and restructuring at the Marikana operation – R1.2 billion of
  annualised synergies by end 2020 (64% higher than forecast)

KEY OPERATING RESULTS
                   US dollar                                                                                                     SA Rand

    Year ended              Six months ended                                                                   Six months ended                Year ended

 Dec 2018   Dec 2019 Dec 2018 Jun 2019 Dec 2019                        KEY STATISTICS                     Dec 2019   Jun 2019    Dec 2018   Dec 2019   Dec 2018

                                                               UNITED STATES (US) OPERATIONS

                                                                      PGM operations1,2

  592,608    593,974    298,649    284,773 309,202 oz                2E PGM2 production             kg       9,617      8,857       9,289    18,475      18,432

  686,592    853,130    326,346    421,450 431,681 oz                  PGM recycling1               kg     13,427      13,109      10,151    26,535      21,355

    1,007      1,403     1,016      1,285    1,508 US$/2Eoz         Average basket price         R/2Eoz    22,150      18,247      14,407    20,287      13,337

    313.6      504.2     160.3      208.3    295.9 US$m               Adjusted EBITDA3              Rm    4,332.5     2,958.4     2,264.5   7,290.9     4,151.9

       26         27        27         26        28 %              Adjusted EBITDA   margin3         %          28         26          27         27         26

      677        784       701        772       795 US$/2Eoz       All-in sustaining   cost4     R/2Eoz    11,678      10,965       9,929    11,337       8,994

                                                               SOUTHERN AFRICA (SA) OPERATIONS

                                                                      PGM operations2,5

1,175,672   1,608,332   606,506    627,991 980,343 oz                4E PGM2 production             kg     30,492      19,533      18,864    50,025      36,567

    1,045      1,383     1,039      1,224    1,475 US$/4Eoz         Average basket price         R/4Eoz    21,671      17,377      14,729    19,994      13,838

    217.6      608.3     136.3      143.8    464.5 US$m               Adjusted EBITDA3              Rm    6,753.2     2,043.0     1,880.7   8,796.2     2,881.8

       19         32        22         33        32 %              Adjusted EBITDA   margin3         %          32         33          22         32         19

      787      1,027       755        932    1,074 US$/4Eoz        All-in sustaining   cost4     R/4Eoz    15,779      13,228      10,706    14,857      10,417

                                                                      Gold operations5

1,176,700    932,659    578,188    344,752 587,908 oz                 Gold production               kg     18,286      10,723      17,984    29,009      36,600

    1,259      1,395     1,212      1,308    1,432 US$/oz            Average gold price           R/kg    676,350     597,360     552,526   648,662     535,929

    102.8      (67.0)     21.0     (207.0)   140.0 US$m               Adjusted EBITDA3              Rm    1,967.7    (2,937.1)      355.3    (969.4)    1,362.4

        7         (5)          4      (49)       16 %              Adjusted EBITDA   margin3         %          16       (49)           4        (5)          7

    1,309      1,544     1,308      1,904    1,347 US$/oz          All-in sustaining   cost4      R/kg    636,405     869,141     596,100   717,966     557,530

                                                                            GROUP

  (189.0)        4.5    (195.4)     (18.1)     22.6 US$m               Basic earnings               Rm       316.8    (254.7) (2,576.3)        62.1    (2,499.6)

    (1.3)      (69.7)     (9.5)     (89.0)     19.3 US$m             Headline earnings              Rm       254.9   (1,263.1)    (117.6) (1,008.2)      (16.6)




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     632.0   1,034.3   315.6   141.9   892.4 US$m      Adjusted EBITDA3      Rm 12,937.5   2,018.5   4,473.8   14,956.0   8,369.4

     13.24    14.46    14.18   14.20   14.69 R/US$   Average exchange rate

1   The US PGM operations’ underground production is converted to metric tonnes and
    kilograms, and performance is translated into SA rand. In addition to the US PGM
    operations’ underground production, the operation processes recycling material which
    is excluded from the 2E PGM production, average basket price and All-in sustaining cost
    statistics shown. PGM recycling represents palladium, platinum, and rhodium ounces fed
    to the furnace.
2   The Platinum Group Metals (PGM) production in the SA Region is principally platinum,
    palladium, rhodium and gold, referred to as 4E (3PGM+Au), and in the US Region is
    principally platinum and palladium, referred to as 2E (2PGM)
3   The Group reports adjusted earnings before interest, taxes, depreciation and
    amortisation (EBITDA) based on the formula included in the facility agreements for
    compliance with the debt covenant formula. For a reconciliation of profit/loss before
    royalties and tax to adjusted EBITDA, see note 11 of the condensed consolidated
    provisional financial statements. Adjusted EBITDA margin is calculated by dividing
    adjusted EBITDA by revenue
4   See “salient features and cost benchmarks – six months” included in the full
    announcement (results booklet) for the definition of All-in sustaining cost
5   The SA PGM operations’ results for the six months and year ended 31 December 2019
    include Marikana operations for the one month and seven months since acquisition,
    respectively. The gold operations’ results for the six months and year ended 31
    December 2018 include DRDGOLD for the five months since acquisitions

Statement by Neal Froneman, Chief Executive Officer of Sibanye-Stillwater

The Group made significant progress delivering on all near-term strategic imperatives
during the course of 2019, significantly de-risking the business and in the process
establishing a solid base for the delivery of further value to stakeholders.
Most pleasing has been continued progress and improvement in safe production, with Group
safety for 2019 improving from the fatalities which significantly affected our SA gold
operations in H1 2018. On 27 January 2020, the SA gold operations achieved a significant
milestone of 10 million fatality free shifts over a 17-month period. This is an
unparalleled achievement in the history of our gold operations and in underground deep
level mining. Milestones like these illustrate what can be achieved when all stakeholders
work together and contribute constructively, and our appreciation goes to our employees,
their union representatives and the Department of Minerals Resources and Energy for their
invaluable assistance and input.
The consistent operational delivery from the SA PGM operations continued, despite the
integration and restructuring of the Marikana operation, the PGM wage negotiations, and
the impact of load shedding towards the end of the year. 4E PGM production of 1,608,332
4Eoz (including the Marikana operation for seven months since acquisition), was 37%
higher year-on-year, with 4E PGM production (excluding the Marikana operation) of
1,100,734 4Eoz above the upper end of annual guidance.
The US PGM operations reported 2E PGM production of 593,974 2Eoz which was in line with
the revised annual guidance. The operational issues which affected the East Boulder mine
and Stillwater West mine during 2019 were successfully addressed during the remaining
months in 2019, with both operations achieving normalised production run rates by year-
end.

The SA gold operations produced 29,009kg (932,659oz) (Including DRDGOLD) for 2019 and
23,427kg (753,194oz) (excluding DRDGOLD) for 2019. Normalised production run rates for
the reduced operating footprint at the SA gold operations were achieved during Q4 2019,
following the conclusion of the AMCU strike in April 2019 and a steady production build-
up.

The strike at the SA Gold operations which was initiated by the Association of Mineworkers
and Construction Union (AMCU) in November 2018, lasted approximately five months before
it was resolved in April 2019. The agreed settlement as in Sibanye-Stillwater’s favour,
with AMCU accepting the same three-year agreement, on the same terms that had been agreed
with the other unions six-months earlier. While the financial impact of the AMCU strike
was significant, we have consistently maintained that absorbing the strike impact was
necessary for us to re-establish respectful and more co-operative relations with AMCU.
The significant increase in the profitability of the SA PGM operations for H2 2019 is
further testament to the appropriateness of the decisions and position adopted during
the SA gold operations strike. The current three-year wage agreements have secured a
period of stability at both the SA gold and the SA PGM operations, which will facilitate


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the optimisation of the operations and enable significant generation of value from these
operations for the benefit of all stakeholders.

The financial results for 2019 were significantly improved relative to 2018, despite
strike related losses incurred during H1 2019 at the SA gold operations. Group revenue
increased by 44% year-on-year to R72,925 million (US$5,043 million), driven by rising
precious metals prices and an improving or steady operating performance across the Group
during 2019, as well as the inclusion of the Marikana operations from June 2019 boosting
Group adjusted EBITDA for 2019 by 79% year-on-year to R14,956 million (US$1,034 million).
Group profit of R433 million (US$30 million) for 2019, improved significantly from a loss
of R2,521 million (US$191 million) for 2018, with H2 2019 profit of R604 million (US$42
million) offsetting the H1 2019 loss of R171 million (US$12 million). Group profit was
affected by various non-recurring and/or non-cash items, the most prominent for 2019
being a R1,103 million (US$77 million) gain on acquisition of Lonmin Plc (Marikana
operations), a R1,567 million (US$110 million) deferred tax credit recognised by the US
PGM operations and recognition of a R3,912 million (US$271 million) fair value loss on
the US$ convertible bonds, following the 258% increase in the Sibanye-Stillwater share
price during 2019, resulting in the bonds trading well above par value.
As a result of the strong operating and financial performance achieved in H2 2019,
progress on deleveraging the balance sheet has accelerated. Proforma net debt:adjusted
EBITDA (ND:adjusted EBITDA) reduced from 2.5x at 30 June 2019 to 1.25x at year end, well
below existing debt covenants and our 1.8x target for the 2019 year-end. Group leverage
should continue to decline naturally over the next two quarters as the adjusted EBITDA
from Q1 and Q2 2019, which were negatively impacted by the five-month strike at the SA
gold operations and the change from a Purchase of Concentrate (PoC) to toll processing
arrangement with Anglo American Platinum, fall out of the rolling total. If the run rate
that has been achieved over H2 2019 is sustained, our net debt to EBITDA ratio should
fall below 1.0x by mid-year. This is without considering the effects of reductions in
net debt that should be achieved through application of free cash generated to repaying
debt.
We are now highly confident about sustained deleveraging of the company’s balance sheet.
Moreover, with the balance sheet further de-risked, we are well positioned to resume cash
dividends during 2020 based on the current deleveraging trajectory and subject to current
commodity prices.

KEY FINANCIAL RESULTS
                       US dollar                                                                                    SA rand

    Year ended               Six months ended                                                      Six months ended               Year ended

                                                                                                         Reviewed
Unaudited Unaudited Unaudited Unaudited Unaudited                                            Unaudited    Revised Unaudited    Reviewed    Audited
 Dec 2018 Dec 2019 Dec 2018 Jun 2019 Dec 2019                                                 Dec 2019   Jun 2019 Dec 2018     Dec 2019   Dec 2018

  3,826.0   5,043.3     1,883.7    1,657.4   3,385.9           Revenue (million)             49,390.5    23,534.9 26,746.4     72,925.4   50,656.4

      (8)         -          (9)       (1)        1     Basic earnings per share (cents)            12       (11)      (114)          2      (110)

        -        (3)          -        (4)        1    Headline earnings per share (cents)          10       (54)        (5)       (40)        (1)




No ordinary cash dividend declared for 2019 (2018: nil)

This short-form announcement is the responsibility of the board of directors of the
Company (Board).
The information disclosed is only a summary and does not contain full or complete
details. Any investment decisions by investors and/or shareholders should be based on a
consideration of the full announcement as a whole and shareholders are encouraged to
review the full announcement (results booklet), which is available for viewing on the
Company’s website at https://www.sibanyestillwater.com/news-
investors/reports/quarterly/h22019-booklet to above and via the JSE link. The full
results announcement is available for inspection at the Company’s registered office and
the office of our sponsors during normal business hours and is available at no charge.
Alternatively, copies of the full announcement may be requested from the Company’s
Investor relations department.
The financial results as contained in the condensed consolidated provisional financial
statements for the year ended 31 December 2019 have been reviewed by EY, who expressed
an unmodified review conclusion thereon.
The JSE link is as follows:
https://senspdf.jse.co.za/documents/2020/jse/isse/sswe/Sibanye.pdf

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Contact:
Email: ir@sibanyestillwater.com

James Wellsted
Head of Investor Relations
+27(0)83 453 4014

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

FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements within the meaning of the “safe
harbour” provisions of the United States Private Securities Litigation Reform Act of
1995. These forward-looking statements, including, among others, those relating to
Sibanye Gold Limited’s (trading as Sibanye-Stillwater)(Sibanye-Stillwater or the Group)
financial positions, business strategies, plans and objectives of management for future
operations, are necessarily estimates reflecting the best judgment of the senior
management and directors of Sibanye-Stillwater.
All statements other than statements of historical facts included in this announcement
may be forward-looking statements. Forward-looking statements also often use words such
as “will”, “forecast”, “potential”, “estimate”, “expect” and words of similar meaning.
By their nature, forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances and should be considered in light of various
important factors, including those set forth in this disclaimer and in the Group’s
Annual Integrated Report and Annual Financial Report, published on 29 March 2019, and
the Group’s Annual Report on Form 20-F filed by Sibanye-Stillwater with the Securities
and Exchange Commission on 9 April 2019 (SEC File no. 001-35785) and the Form F-4 filed
by Sibanye Stillwater Limited with the Securities and Exchange Commission on 4 October
2019 (/SEC File No. 333-234096) and any amendments thereto. Readers are cautioned not
to place undue reliance on such statements.
The important factors that could cause Sibanye-Stillwater’s actual results, performance
or achievements to differ materially from those in the forward-looking statements include,
among others, our future business prospects; financial positions; debt position and our
ability to reduce debt leverage; business, political and social conditions in the United
States, the United Kingdom, South Africa, Zimbabwe and elsewhere; plans and objectives
of management for future operations; our ability to obtain the benefits of any streaming
arrangements or pipeline financing; our ability to service our bond Instruments (High
Yield Bonds and Convertible Bonds); changes in assumptions underlying Sibanye-
Stillwater’s estimation of its current mineral reserves and resources; the ability to
achieve anticipated efficiencies and other cost savings in connection with past, ongoing
and future acquisitions, as well as at existing operations; our ability to achieve steady
state production at the Blitz project; the success of Sibanye-Stillwater’s business
strategy; exploration and development activities; the ability of Sibanye-Stillwater to
comply with requirements that it operates 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; 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; the 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 management positions; failure of
information technology and communications systems; the adequacy of insurance coverage;
any social unrest, sickness or natural or man-made disaster at informal settlements in
the vicinity of some of Sibanye-Stillwater’s operations; and the impact of HIV,
tuberculosis and other contagious diseases. These forward-looking statements speak only
as of the date of this announcement. Sibanye-Stillwater expressly disclaims any obligation
or undertaking to update or revise any forward-looking statement (except to the extent
legally required).




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Date: 19-02-2020 08:00:00
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