Sibanye’s gold operations progressed ahead of plan

Sibanye Stillwater in its operating update for the quarter ended 30 September 2020 said the post lockdown production build up at the SA Gold operations progressed smoothly and ahead of plan. Gold production of 8,987kg (288,938oz) for Q3 2020 was flat year-on-year, with production building up during both Q3 2020 and Q3 2019 following significant operational disruptions in prior periods.

During H1 2020 operations were suspended due to COVID-19 and during H1 2019, the production was significantly affected by the five-month AMCU strike. AISC of R715,345/kg (US$1,316/oz) remained elevated due to lower production, above inflation electricity tariff and wage increases.

Gold production (excluding DRDGOLD) of 7,473kg (240,262oz) was similar to the comparable period in 2019, with AISC of R746,127/kg (US$1,372/oz), 9% higher than for Q3 2019.

The average gold price for Q3 2020 of US$1,845/oz was 27% higher than for the comparable period in 2019, which together with the 15% depreciation of the average rand: dollar exchange rate year-on-year boosted the average rand gold price received for Q3 2020 by 47% to a record level of R1,002,945/kg.

The inherent leverage of the SA gold operations to the rand gold price was clearly evident with the adjusted EBITDA margin for the SA Gold operations expanding to 37% compared with 14% for Q3 2019 and adjusted EBITDA increasing 282% to R3,218 million (US$190 million) for Q3 2020.

Underground production from the Driefontein operation of 2,424kg (77,933oz) increased by 17% due to a 14% increase in the average yield to 6.26g/t compared with 5.51g/t for the comparable period in 2019. The higher average yield during the period was a planned consequence of the phased recall of employees since May 2020, with returning crews initially directed to high grade areas, in order to build production and revenue as fast as possible. Underground yields have naturally normalised as the employee complement has increased. AISC declined by 5% to R741,525/kg (US$1,364/oz).

Underground production from the Kloof operation increased by 11% to 2,881kg (92,626oz) compared to Q3 2019, due to a 14% increase in the underground yield for the same reason outlined above. The Kloof surface operation was less impacted by COVID-19 constraints and spare capacity at the underground plants was utilised to accelerate surface throughput in order to offset lower throughput from underground. Surface production for Q3 2020 increased by 23% compared with Q3

2019, to 457kg (14,693oz). Considering the additional cost associated with COVID-19, costs were well controlled, with AISC for Q3 2020 of R718,630/kg (US$1,322/oz) being similar to Q3 2019. As mentioned above total AISC for Kloof is14% higher than the total AISC for the comparative period as a result of higher sales in the current quarter compared to the same period in 2019 (higher GIP and gold on hand in Q3 2019 compared to Q3 2020).

In contrast to the Driefontein and Kloof operations, underground gold production from the Beatrix operation of 1,319kg (42,407oz) declined by 36% compared with Q3 2019. Beatrix employs a higher proportion of foreign nationals than Kloof and Driefontein, with lower crew availability delaying the production build up.

Gold production from surface sources increased by 56% to 64kg (2,058oz) due to utilisation of spare plant capacity. AISC for Q3 2020 of R847,561/kg (US$1,559/oz) was 53% higher than for the comparable period in 2019 due to the high fixed cost nature of the operations offset by the lower wage costs of employees not recalled, with lower production in the period.

OUTLOOK

Gold production from the managed SA gold operations (excluding DRDGOLD) for 2020 is forecast to be at the upper end of the production guidance of between 23,500kg and 24,500kg (756,000oz and 812,000oz) and as a result AISC is anticipated to be at the lower end of the cost guidance of between R805,000/kg and R840,000/kg (US$1,473/oz and US$1491/oz).

Capital expenditure is expected to be marginally lower than the guidance of R2,850 million (US$168 million).

The 2020 dollar guidance is based on an average exchange rate of R17.00/US$.