Neal Froneman. Picture: SUPPLIED
Neal Froneman. Picture: SUPPLIED

The true cost of the five-month strike at Sibanye-Stillwater’s gold mines was laid bare in its March quarter numbers, with the cost of production nearly double that of the price it received.

The group's all-in sustaining costs were R1m per kg of gold, far above the R550,000/kg at normal production levels, CEO Neal Froneman said.

At Beatrix, the worst-affected mine during the strike, its all-in sustaining costs were R1.1m/kg.

To put these costs into perspective, the global average all-in sustaining cost during 2018 was $897/oz, which at the prevailing exchange rate works out to around R418,000/kg.

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Sibanye is restructuring  two unprofitable mines, Beatrix and Driefontein. Sibanye has said up to 6,670 people could be affected in the process, the results of which will be released in coming weeks.

The Association of Mineworkers and Construction Union (Amcu) called a wage strike on November 21 2018, and ended it a few days short of a full five months on April 17, settling for little more than three other unions had agreed to in November.

But the damage done by bringing out half the gold workforce on strike was revealed in the first quarter’s numbers.

Gold output, excluding that from the 38%-held DRDGold, a tailings retreatment specialist that was unaffected by the strike, fell by 63% to 106,948oz compared with the same quarter a year earlier.

The received gold price for the quarter was R588,040/kg.

The strike meant Sibanye was unable to realise the improved gold price, which averaged R507,719/kg a year ago.

Sibanye noted, however, its platinum group metals (PGMs) businesses in SA and the US offset losses from the gold division.

“The operational and financial impact of this extended strike at the SA gold operations was mitigated by another solid operational performance from the SA PGM operations,” Sibanye said.

The strong increase in palladium and rhodium prices combined with a 17% weakening of the rand against the dollar pushed up earnings and cash flows at its local PGM portfolio, which includes the Rustenburg mines it bought from Anglo American Platinum, and the whole of Aquarius Platinum.

Adjusted earnings before interest, tax, depreciation and amortisation (ebitda) is not a recognised accounting measurement but it is one Sibanye’s lenders use to measure against debt when assessing the company’s compliance with debt covenants.

The SA PGM business reported an increase of adjusted ebitda by 38% to R353m.

All together, the  South African and US PGM operations, excluding Rustenburg, which operates under a toll treatment agreement meaning revenue will be realised in coming months, generated adjusted ebitda of R1.82bn in the quarter, offsetting the R1.66bn loss from the gold division.

Sibanye reported a net debt to adjusted ebitda ratio of three times, which is below the 3.5 times ratio set in the covenants for 2019.

Sibanye has raised R3.45bn in a rights issue and income from forward gold sales.

“Precious metals prices remain significantly elevated and at current spot prices further deleveraging towards an anticipated target of 1.8 times net debt to adjusted ebitda is expected by year-end,” said Froneman.