SIBANYE Gold shares fell 11% to R25 on Monday after the mining group reported a poor quarterly performance. This has been blamed on costs rocketing and production falling for a variety of reasons, including underground fires, conveyor belt problems and Eskom power cuts.
Operating profit for the three months to end-March slumped to R774m from R1.74bn in the same period last year and R2.2bn at the end of December.
Cash costs rose by nearly R100,000/kg to R384,839/kg in the three months to end-March, compared with R289,959/kg in the same quarter a year earlier.
All-in costs shot up to R473,573/kg from R365,187/kg.
The average gold price received in the quarter was R459,564/kg.
The shares were down 11% at R25.08 in late afternoon trade, making it the largest faller of the gold majors on the JSE.
Sibanye, the largest producer of South African gold, maintained its full-year output target of between 1.61-million and 1.67-million ounces of gold.
CEO Neal Froneman said the reasons for the underperformance at its mines had been addressed during the quarter and in March the mines had turned in a much stronger operational performance.
Among the reasons given for the 5% fall in production to 315,300oz were an underground fire and conveyor belt failure at Kloof mine, inter-union conflict at Beatrix and reduced electricity supply from Eskom.
These disruptions "were primarily a factor during January and February, with the operational performance improving significantly during March", Mr Froneman said.
"Opportunities to enhance productivity and recover gold production lost during January and February have been identified and implemented at all of the operations."
Kloof, a mine near Carletonville, had arguably the worst quarter, with production falling 33% to 77,400oz and operating profit plunging 85% to R102m for the March quarter.
Sibanye, which reports financial and operational results in June and December, flagged the pending gold sector wage talks in coming weeks.
"Many gold mines are marginal, and inflated wage and benefits increases will significantly impact on the sustainability of the industry, and, while delivering short-term gains for employees and unions, it will inevitably result in the loss of jobs and destroy value for all stakeholders in the longer term," Mr Froneman said.
The National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu) are poised to make high demands as the talks open, with many observers predicting a strike.
Amcu brought platinum mines around Rustenburg to a five-month stop during its wage talks last year.